Individuals can borrow a predetermined amount of money and have it disbursed as a lump sum that can be repaid over time. These loans usually have a fixed rate of interest and require monthly payments that are the same each month. A portion of the monthly payment is applied towards the principal, while the remainder is used to pay the interest.
Installment loans are not like credit cards or lines of credit. These have more flexible repayment terms, variable interest rates and less predictable monthly payments. With installment loans, you know what your monthly bill will look like.
Types Of Installment Loans
There are many options for installment loans. Although they work the same, each type has different features, loan purposes, and interest rates.
Personal Loans
Personal loans are money that a lender provides. They can be repaid over a specified period at a fixed interest rate in monthly installments. These loans can be obtained online from private lenders or credit unions.
Personal loans are provided as a lump sum that can be used for a wide range of purposes.
Personal loans generally have terms that range between 24 and 60 months. Some can even go up to 72 months.
No Credit Check Loans
Payday lenders often offer no-credit-check loans. They don’t require you to have a good credit history before lending money. Payday Loans are designed to help consumers in an emergency or when they don’t have any other sources of credit.
Payday loans are short-term loans that can come with high costs. Payday loans are a form of secured borrowing that is secured by your paycheck. Your credit score doesn’t matter.
Once you are approved for a payday loan, you hand the direct lender of cash a postdated copy of the amount you borrowed along with any fees. The lender cashes the check when you next pay your bill.
When you apply for an online loan, the company has the right to access your bank account and take the funds out of your paycheck once your employer has paid you.
Auto Loans
Installment loans are also very popular. A car loan is a type of installment loan that allows consumers to make a down payment or use the trade-in value of their car. Then they finance the rest of the purchase price using a car loan. Lenders make monthly payments until the car loan is completely paid.
Benefits Of Installment Loans
Many benefits are offered by installment loans. Some of these include:
Consistent Monthly Payments: For the entire loan term, the monthly payments will remain the same. This makes it easy to set up a budget and pay the bills on an ongoing schedule.
Credit Score Increase: Having a clear payment history and paying on time for an installment loan is a great way to improve your credit score.
Refinance Opportunities: If your interest rates drop or you have a better credit score, refinancing your loan into a new one can be very beneficial. It will likely lower your monthly payments or reduce the term of the loan.
