Installment loans are some of the most popular types of loans across the globe. The major reason for their popularity is that they are very easy to understand and very rarely have a lot of fine print that can land you in trouble. Installment loans are quite like a lot of loans you’ll probably deal with: you take a loan and then over time you pay it back through various periodic payments, in other words, Installments.
How to Get Installment Loans Online?
There are various reasons for needing a loan. Most of the time they are sudden expenses which you did not see coming. However, this does not mean that you don’t have any options available for loans. These loans do not need to be repaid at once. You can take your time to pay them off in a set number of Installments. Even if you have bad credit, you can easily qualify for these types of loans. You can get the funding you need very easily and also set any plan for payment that works for you. You can learn more on PersonalMoneyNetwork.com.
What Are Some Common Installment Loans?
While most loans that you will come across in your lifetime will be Installment loans, some of the most popular types are loans on mortgage, auto loans, education loans, and personal loans. There are some Installment loans whose rate changes over the duration of the loan, but most loans of this type have a fixed rate throughout their term, and the rate of interest is always set when you borrow it.
To make it easier for the borrower to budget their finances and prepare in advance, the amount due for payment at the end of regular cycles (generally monthly) is always kept constant, keeping in mind the final amount due after the interest is accrued.
Secured and Unsecured Loans
There are generally two broad categories of Installment loans: secured and unsecured. The names are quite self-descriptive. A great example of secured loans are the mortgage loans where the collateral (security) is the new house itself. Another example is an auto loan where the collateral is the new vehicle.
There are various Installment loans, mostly personal loans, which can be taken without the need for any collateral. A major component in an unsecured loan is the creditworthiness of the borrower. This is determined by a credit score in most countries. Your general income amount at the time of borrowing and your assets can also play a huge factor in getting you that loan.
As you would expect, the rate of interest is generally higher on a loan without any collateral than a loan with one. This is to protect the bank (or another institution or lender) from the higher risk they will be undertaking by giving away a lump sum of money without any collateral.
The Entire Process of an Installment Loan
The application process for getting an Installment loan is pretty easy. You have to sign a form, or document, with the lender that states various specifications of the loan like its purpose, the down payment (if any), how long will the loan stay for, the interest rate, the schedule of the payments, the cycles of payments, and finally the amount you will need to pay at the end of every cycle for the duration of the loan.
Down payment can get the lender to decrease the rate of interest. If you do not wish to lower the interest rate, you can get the lender to spread the loan over a longer period of time, leading to lower cyclic payments.
The loan is generally considered paid when all the payments are met by the borrower at the required times. You can save some money on the interest by making payments earlier than scheduled. You may also accrue more interest should you not be able to make your payments on time. However, some lenders also include a prepayment clause in the documents that impose penalties on you for paying off their loans early. This is to get them some of the money back that they have otherwise lost out on interest.
Advantages of Installment Loans
Installment Loans Are Very Flexible
The major advantage of an Installment loan is its flexibility. The terms and specifics of the agreement can be altered to suit the desired needs of the borrower. These mostly include the total amount of the loan and the duration for which the money has been lent. In some cases, you can even manage to lower the interest rate.
Better than Credit Cards
The rate of interest for most Installment loans are really low. This means that the borrower can get some finances more easily. These rates are better than credit cards, which involve a kind of financing called revolving credit.
Disadvantages of Installment Loans
Change in Market Rates
When you take out a loan for a long term, there is a high chance that over the years, the rates of interest may fall during the term of the loan, resulting in you paying a higher rate of interest than the current market rate. There are often clauses in the document which you can use for refinancing the loan. Refinancing is a process that helps you revise the terms of a loan agreement. It is usually done to make changes that are favourable to them like the interest rate, the schedule of the payments, or any other terms. A new contact is drafted with the changes that have been agreed upon and sent to the borrower.
A Financial Obligation
There might be times in the future where you may be rendered incapable of meeting the cyclic payments. This will mean that you will default the loans and risk the forfeiture of your assets or any collateral which you may have utilized to get the loan.
Installment loans are fairly simple. They are even simpler when you compare them with other financial agreements in the world. If you take some time to judge your own credit score, assets, requirements, and figure out your requirements in terms of payment amounts and loan duration, you will be able to take out a loan with ease.
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