Installment Loans

Everything You Should Know About Installment Loans

If you have been wondering what an installment loan is, then this post might be what you’ve been searching for. In this post, we will take a look at what an installment loan is and take a look at some of the pros and cons associated with installment loans.

So, if that sounds fun, let’s dive right into it:

What Are Installment Loans?

Well, an installment loan is when you borrow money, but you agree to pay the money in a series of monthly installments or payments. Basically, with an installment loan, there is a set payoff date for the borrower, with a set amount of payment.

With an installment loan, the keyword considered is the installment, and what that means is: for example, if you are financing a student loan for five years, and you pay the loan once a month, then this means you have 60 installments to pay ( 60 individual payments).

Some of the most common types of installments include mortgages, student loans, personal loans, and auto loans.

Installment Loans Vs Payday Loans:

Most people often confuse both terms, but let’s make it simple:

With a payday loan, let’s assume you have an emergency, and the emergency happens ten days before your payday. To help you cover the cost of your emergency, you can go in for a payday loan, and then you will have to repay the loan once your paycheck is in. Generally, a payday loan is the shortest form of loan available, and you must pay in 30 days or less.

However, with an installment loan, you get more time to pay off your loan instead of paying it off on your payday. Also, with an installment loan, you can take borrow more money as compared to a payday loan, and then you can refinance the loan according to your needs.

Why Should You Go In For An Installment Loan?

1.It Is Flexible:

The main benefit of an installment loan is that– with this type of loan, the installment you are paying each month is specified. As such, you get to budget your finances to know how much you want to dedicate each month to cover your loan. Also, since you know when your payoff day is, it gives you the flexibility and comfort you need when paying off the loan.

2.You Have An Option

With installment loans, you have the option of going in for a secured or an unsecured installment loan. With a secured installment loan, you must have collateral to be able to qualify for the loan. Whiles with an unsecured installment loan, you wouldn’t be required to have collateral to qualify for the loan.

This is different from other forms of loans such as a line of credit where you would be required to secure the loan with a tangible asset.

3.Interest Rate Is Fixed

With an installment loan, your interest rate is fixed. This means the interest rate you pay doesn’t change throughout the period you borrowed the money.

Installment Loans Has Its Flaws:

The most common disadvantage with installment loans is that you cannot reuse the loan once it has been paid. For example, if you pay off a $40,000 installment loan, you cannot claim that money again. However, you will be required to reapply with a new installment loan.