An Installment loan is any type of loan where you borrow a fixed amount of money all at one time. You then repay the loan over a set number of payments, called installments. While credit cards allow you to take out money on an on-going basis, loans make you decide how much money you need before borrowing the funds. Payments are typically done monthly, but not always. There are many reliable companies out there that offer installment loans such as WesternShamrock.com. We recommend doing your research and talking with all necessary parties to make sure this is the best decision for you at this time!
3 most common examples of installment loans
Now that you are more familiar with what an installment loan is, we will go over the three types applied for most.
Auto Loans
Auto loans are secured loans that use your car as collateral. Auto loans are commonly used by customers looking to purchase a new car. Installments are paid over the course of years and are granted based off of good credit. The range varies from 12-96 months, although negotiations can be made in this regard. It is best to go for a shorter term agreement as monthly interest rates tend to be lower than terms with a longer range.
Mortgage Loans
A mortgage loan is an installment loan used to pay off a house. These are the most popular types of installment loans. Unlike auto loans, mortgage loans are paid off over a far greater amount of time–normally 15 to 30 years. Additionally, consumers who take out mortgage loans usually ask for a greater amount of money, loans over the 100,000 dollar mark are not uncommon. Lenders will take a look at the borrowers’ credit and financial history before granting the loan.
Personal Loans
Personal loans are used for exactly what you’d think– personal reasons. This can include emergency situations such as medical debt or pressing car repairs. Personal loans don’t require collateral like auto or mortgage loans do, meaning the interest rates may be higher. Some people use the strategy of taking out personal installment loans instead of racking up credit card debt. Either way, be sure to find out what your interest rates will be for your persona loan before you start the process.
Benefits of Installment Loans
Once you have an established loan, the payment amount will not change. This is extremely beneficial, because as time goes on you will continue to pay the same amount. It is also beneficial because you can budget for the monthly expense as it will never come unexpectedly.
Another benefit, is that you have the reassurance of knowing your debt will be paid off by a certain date. If you continue to stay on track and budget correctly, you will quickly approach that date. If you receive a loan with the shortest payment term and keep up with each payment– you can pay less interest and save money.
Additional suggestions and Tips
Credit score- You’re credit score will effect your loan approval and the rate of your installment loan. When applying for a huge loan like a mortgage loan, a low credit score can be detrimental. Mortgages have stricter credit score requirements than any other type of loan. A credit score between 720-850 will give you the best rates.
However, don’t let this deter you from taking out a loan, as a poor credit score can be improved quickly. Do your research on ways to improve your credit. Key areas like derogatory marks can harm your credit in big ways. Although, there can be errors made with derogatory marks, so be sure to dispute it if you do not recognize it. Not only that, but you can use personal installment loans to help build your credit back. Financial institutions should be able to help your if this is your problem.
Research and Knowledge- You know what they say, ‘knowledge is power’. Bottom line is, if you’re considering taking out an installment loan make sure to weigh your options and fully understand the terms of the loan your agreeing to. Don’t be afraid to compare different rates and speak to different companies to find the one that works best for you.