When looking to take out a loan with relatively flexible repayments, then installment loans could be your best bet. The biggest perk of these loans is that they allow you to take out massive cash amounts with little pressure of repaying it, ie repayments are done in small bits.
In this era of Covid-19, you might have experienced hard economic times, and even if not, you never know what the future holds for you. That is why having some knowledge about installment loans is very vital.
What Are Installment Loans?
Installment loans are designed to allow individuals to borrow a specific amount of money. While there is no set borrowing amount with other forms of revolving credit like credit cards, this requires you to decide beforehand on the amount you wish to borrow.
How They Work
The borrower is required to repay the loan over a certain period of time which is decided from the start. This fixed payment period is often decided upon by both the lender and the borrower. Also, this repayment amount comes with a predetermined interest often determined by the period which could be months or years.
Usually, the payments done are often referred to as installments, which gives this loan the name ‘installment loans’. To begin with, you are required to fill out an application form online. This prompts you to fill in personal details such as your income, your address, income, your intention with the loan if guaranteed, your expenses, loan term, etc.
Lenders then assess your application after submission to determine whether you are legible or not before informing you. The amount you receive and the loan terms are also determined by your credit provider after they assess your creditworthiness.
While you understand what installment loans are, do they have any benefits? Let’s look at some of them.
You can Make Big Purchases
One of the biggest advantages of installment loans is that you can make big purchases out of the loan you take out. As mentioned before, these types of loans enable you to take out a lot of cash. Even when you need to purchase a car, you can take out an auto loan and have the vehicle as collateral for the loan.
On the other hand, if you wish to buy a house but lack the financial capacity to do so, you can apply for a mortgage loan to make the purchase. This loan can be paid back slowly for whatever years agreed upon, oftentimes between 15 and 30 years. For obvious reasons, taking out short-term loans for such big purchases might be impossible.
Monthly Payments Are Guaranteed
Another major perk about taking out installment loans is that the monthly payments are usually constant. So, there are not surprises during the term period as your lender can’t adjust the set payable amounts. However, although the repayment amount is constant, you can request a loan restructure if you wish to make any changes.
This ensures that you are always prepared and gives you an easy time budgeting your income since you know exactly what you are required to pay.
No Pressure on The Repayment of the Loan
Based on the amount borrowed, installment loans allow you to make repayments over a prolonged period of time without pressure. This reduces strain and gives you peace of mind as you pay back your loan.
This is especially beneficial when compared to other types of loans where you are required to make repayments inclusive of the interest monthly. This is one of the main reasons why a lot of individuals default on their loan repayments, eg like with payday loans.
A Great Credit Score Can Give You Better Rates
Installment loans grant you favorable interest rates if you have good credit score. The loan amount will be smaller than if you had bad credit score, so you are going to have an easy time paying back the loan, probably faster than it would have normally taken.
You Can Take Installment Loans to Build your Credit
One of the main reasons a lot of people don’t qualify for loans is bad credit score. The good news with installment loans is that they can help you build a positive one. So when you have bad credit score, taking out an installment can help get you to the right side.
Usually, your credit provider will send reports to either of the three credit bureaus, so the timely you are with your repayments the better the credit score gets. Knowing what installment loans are, how they work, and their benefits, you can check SFGate which has a review of the best installment loans that might interest you.