If you are on the internet and you have been searching for different forms of credit and loans, you may have heard of installment loans. Now if you are wondering what they are and how exactly they can help you, this article will put that question into the spotlight. To begin with, an installment loan is a form of a loan that allows you to borrow a set amount of money. In return, you repay the loan on a repayment schedule that is typically on a monthly basis but not always. Now the difference between this and other forms of credit like revolving credit is that you can only withdraw an exact amount. Whereas with credit cards and lines of credit, you can have an unlimited amount of credit which increases your debt and payments. After you take out the loan you begin to repay the loan in an agreed upon amount of time between you and the lender. Your payments will be on a monthly schedule unless if stated otherwise. Every time you make a payment on the loan it is known as an installment.
There are plenty of different types of installment loan plans that include automotive loans, mortgage loans, personal loans, and even student loans. The different types will be explained below.
People will use a home mortgage which is a form of installment loan that people use to borrow the necessary funds to purchase a house. A home mortgage will usually be repaid between 15 and 30 years and the payments stay the same over time. This means the capital and interest does not change.
A personal loan can be used for a large variety of different reasons. Some people will use these to consolidate their debts. Other people will use this for student loans or to pay for unexpected expenses like vehicle repairs or other types of issues where emergency funding is necessary. People who take out a personal loan can pay back their loan typically over a 12 to 96 month period. These loans usually have higher interest rates because there is no collateral needed.
The positive attributes of installment loans
Many people agree that installment loans are a great tool because of the monthly repayment plan and knowing that your debt will be paid off by a certain date. An installment loan offers you a fixed interest rate that does not change. You will have the exact same monthly payment until you have completely paid off your loan. Having the exact same monthly payment can make budgeting for a loan that much easier and makes it less stressful. A positive attribute of these loans is that your debt will be paid off eventually and you will know the exact date when that happens. If you get a loan with a shorter repayment plan you will pay less interest and will have your loan paid off that much quicker.
The negative attributes of installment loans
There can be a certain negative features of installment loans and one of them is the fact that you cannot take out more money if needed. When you have a credit card or a line of credit, you can take out further money. With an installment loan, you will have to take out a new loan to get further funding. It is imperative that when you decide you need one of these loans, that you take out the exact amount you need. Now at most loan stores, installment loans and the amount of interest you pay will be based on your credit rating. If you have a bad credit rating or no credit at all, typically you will pay much higher interest rates. At our website, we do not use credit bureaus or networks which means we can help you no matter what your credit history may look like. At loan stores, having higher interest rates can make the cost of a loan that much more expensive. Another fact is that guaranteed bad credit installment loans can come with additional fees and penalties attached to the loan. These can include insurance on the loan if chosen, and prepayment penalties when you are able to pay off the debt sooner.