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If you are nursing the thought of getting an installment loan, brush up on your finance knowledge. In this article, we'll discuss what an installment loan is and how the whole process works.
An installment loan is a loan that allows you to borrow money and payback in installments or fixed payments over some time or term. When referring to an Installment loan, the word 'term' means the time you have to repay a loan. For example, a 36-month term allows repayment over three years.
Most of the popular loans people take out are categorized as Installment loans. Mortgages, student loans, personal loans, auto loans are all types of Installment loans. Below is a summary of the three popular types of Installment loans :
· Auto loans
Auto loans, also known as car loans, are a common type of an installment loan offered by credit unions and banks. The interest rate for Auto loans typically falls between 3% and 15%
· Personal loans
Personal loans are another common type of installment loan. Credit unions and banks offer these loans. Although these loans can be used for any purpose, most people use it to consolidate debt.
The interest rate for personal loans is generally between 6% to 36%, with terms between 2-5 years. Rates, conditions, and loan features for personal loans are different among lenders, so it's prudent to compare these loans from multiple lenders.
The mortgage, also known as home loans, is arguably the most traditional installment loan. A mortgage is an Installment loan used to buy to a house. Typical mortgage terms are 15 to 30 years, with the option of an adjustable or fixed interest rate.
There are several numbers of places you can get an installment loan. However, in the digital era, everything starts with the internet. You can begin by typing installment loans near me in the search bar. That will reveal many options for you. Sof these places include:
Banks are the number one source for different types of Installment loans, including mortgages, student loans, and auto loans. However, you will need to establish a relationship with any Bank of your choice by opening a current or savings account.
Credit unions offer members based on the geographic region, the organization they work for, or others. Unlike banks, Credit unions offer lower rates and lower terms to people seeking installment loans.
Online installment loans are becoming increasingly popular nowadays and are now a prime source of Installment loans. Applying for an installment loan online is often fast and well streamlined.
When applying for an online installment loan or from any other source, there are some factors the borrower will use to evaluate your application.
· Good credit score : Just like any different kind of loan, the better your credit score, the more your chances of getting approved increases. Generally, a FICO score of 700 is deemed suitable, while 800 above is considered excellent. Also, a higher credit score will offer you a lower interest rate.
· Good credit history : Do you pay your debts on time? Is there any case of bankruptcies? Do you have any public blemishes on record? All these you need to consider before applying for an Installment loan.
· Stable source of income : Every lender will verify if a borrower has a stable source of income. Checking this will ensure the borrower will be able to make all payments on time and in full.
· Collateral : For some big or small installment loans, you must provide collateral to the lender. The guarantee provided will serve as a form of security. In a scenario of investment against an asset like a car or a home, the asset will serve as the collateral. However, some lenders will require you to provide additional insurance. It can be in the form of any assets you may own.
An installment loan can be a lifesaver; however, before you take it, considers these pros and cons.
1. Small installment loans are easy to anticipate
Installment loan makes it is easy for you to know how much you need to pay monthly. Thus allowing you to predict your budget.
2. Installment loans are lock in low rates
Generally, installment loans offer a fix interest rate for the duration of the loan. For a borrower with excellent credit scores, getting a low price will help save a lot of money.
1. Installment loans are not flexible
In most cases, once you take an Installment loan, you can not increase the loan amount after receiving the funds.
2. Installment loans may not allow prepayment
Some lenders don't allow pre-closure of an installment loan even if the borrower wants to pay higher amounts per month and close the loan on time.
Having an idea about these differences between payday loans and Installment loans can help you determine which loan is best for you.
Payday installment loans are offered in small amounts and borrowers payback in a short-term time frame. On the other hand, installment loans allow borrowers to pay back an equal payment each month to the lender. If you intend to get payday installment loans online, you should be conscious of the time frame.
Installment loans could be attractive to someone who is building credits or urgently needs money. However, he/she needs to have a stable source of income to make payments regularly.
Selecting the right installment loan lender is a tough task, but it is essential for your financial health that you make the right decision and don't get confused by the options, especially if it's your first time. Here are some tips to guide you:
· Check the company lending requirements if you comfortable with it
· Check for reviews about the company's service
· Compare interest rates
Yes! Some lenders offer installment loans, no credit check. There are many services providing installment loans online, no credit check. Some companies also offer bad credit installment loans.
Installment loans for bad credit are loans for those with no credit history or lower credit scores. The loans work the same way as other installment loans. However, the fees and interest rates are higher.
Not all installment loans are good; some have wrecked businesses and lives. Some installment loans you should avoid taking include:
· Overdraft loans
· Car title loans
· Credit Card Cash Advance
The above-mentioned installment loans incur very high-interest rates and can be never-ending to pay.
If you are thinking about taking an Installment loan, ensure you understand the terms and conditions before signing any agreement. In case you don't have a good credit score, bad credit installment loans might do the job for you.