Are you considering getting an installment loan? Then, you should know that an installment loan allows you to borrow a certain amount of money from a lender which you have to agree to pay back including interest over a specific period in the form of monthly payments. You might even have an installment loan already but not even know it. This post looks at 11 things you should know about installment loans.
- Different Types of Installment Loans
The first thing that you need to know about installment loans is that there are different types of installment loans. They are broadly categorized into two main categories, namely secured and unsecured. To receive a secured loan, you need to provide some collateral such as someone’s property or assets as a security against your loan. If you fail to pay, the lender would have the authority to take ownership of the collateral. For instance, when you take an auto loan and are unable to repay it, the lender would be able to repossess the car. On the other hand, unsecured loans are referred to as personal loans and require no collateral.
- Small Loan Amounts
Installment loans tend to offer a small amount of money. Generally, when people request a loan, they require a high amount of money such as for the financing of a home or car. However, for those people that need a loan for a smaller purchase, an installment loan is just what they need. Installment loans cover just about any amount you might need. Whether you require a few hundred or a few thousand dollars, you can expect an installment loan to suit your financial needs.
- Easy to Qualify
As much as one-third of Americans have a low credit score of less than 601. Since anything under 601 is treated as a bad credit score, it can be difficult for such people to obtain a loan through a bank. Hence, an installment loan is just what anyone with a bad credit score needs. If you have had a tough time qualifying for a loan in the past, you might want to consider getting an installment loan since most installment lenders provide quick loans to anyone that has a low credit score. At times, the lender might not even conduct a credit check but will require a valid bank account or proof of income. Thus, it is quite easy to qualify for an installment loan as compared to other loans.
- Fast Approval
If you have ever applied for a bank loan, you would have remembered just how long it can take for the loan to be approved. It could take you anywhere from a few days to even a few weeks to get your loan processed. This is why when you require money fast it is difficult to simply wait for the lender to approve your loan. Hence, an installment loan is just what you need. It has a very fast approval process. In some cases, it has even taken just a few minutes to get a loan approved.
- Simple Requirements
Unlike loans at a traditional bank where you are expected to meet lengthy requirements to obtain a loan, installment loans have simple requirements that can be easily met. You do not need a ton of paperwork to get an installment loan. All you need is a bank account, US citizenship, and to be over the age of 18.
- Short Payment Plan
Some loans take years to pay off. With interest bringing up the cost of borrowing, it can take forever for some people to pay off their loans. Such loans require you to pay a lot more in interest than the amount of the loan itself. Installment loans, on the other hand, have a short life and can be usually paid off anywhere between 90 and 120 days. Thus, you do not need to waste many years paying off the loan.
- Spending Freedom
When you get an auto loan, you can only use that money towards purchasing the car. The same applies for a home loan. This is where installment loans are unique. You are under no obligation to spend the money on a certain thing. Instead, you have complete freedom over how you spend the money.
- Perfect for Last-Minute Expenses
You never know when an unexpected expense might pop up in your life. People get sick, houses get damaged, and cars need to be repaired. Even if you do not have the money when you need it, with an installment loan you will have the money within just a few minutes. Therefore, installment loans are ideal for emergencies.
- Predictable Monthly Payments
A great thing about installment loans is that they have a fixed interest rate from the beginning. Thus, the interest rate does not change during the repayment period. This means you get to benefit from predictable monthly payments. Hence, installment loans are perfect for anyone on a tight budget. It allows you to know how much you owe each month which allows you to plan your monthly budget. Besides, just predictable monthly payments, when you take up an installment loan, you also know when you should be done with paying it off since the loan is offered after setting a fixed term.
- Higher Credit Limit
Installment loans provide you with a higher credit limit than credit cards. You get to borrow more money when you take up an installment loan, unlike a credit card which does not allow you to borrow a lot of money. With an installment loan, you get to borrow as much as 85 percent of the value of your home minus what you might owe.
- Impact on Your Credit Rating
When you take an installment loan, it also impacts your credit score. Hence, it is important that get an installment loan that you will be able to pay back on time.
Installment loans have become incredibly popular in recent times. They are ideal for anyone that has a low credit rating and is looking for fast cash.