In a nutshell, an installment loan is a loan designed to be repaid in fixed amounts, making it easier to anticipate how much a purchase will cost you monthly. There are other associated benefits of these types of loans such as fixed interest rates for the life of the loan.
Types
Installment loans are typically used to purchase a vehicle, house or there are also personal loans. For example, if you are house or car shopping near the beaches in southern Texas, you’d be researching installment loans in Corpus Christi.
When looking to finance a vehicle, keep in mind that every lender has different terms for the loan. Typically, depending on your credit rating, your interest rate will reflect the type of credit you have. Those with better credit are offered more appealing rates. Every lender also has different lengths for the life of the loan. Depending on the reason for the loan and the lender, the life of the loan can vary from 12-96 months. The longer the repayment time, the smaller your monthly payments are.
Mortgages, on the other hand, are mostly 15 or 30 years. Again, the rate you are offered will depend on your overall credit history. The good news is, when you pay your installment loan as agreed (meaning paying at least the minimum payment on time), it helps to improve your creditworthiness.
Even though there are several factors to consider when determining your overall credit score, payment history is a major contributing factor. Especially if you have a less than stellar credit report, by showing a good payment history, you are well on your way to repairing your credit and improving your score.
Flexibility
One of the appeals of installment loans is the flexibility they offer. Other loan types typically have more stringent acceptance criteria. Installment loans tend to be more forgiving to a vast array of credit customers. All the more reason to use your installment loan to help improve your credit rating by making timely payments. How you pay your bills is directly related to your creditworthiness.
Personal Loans
Taking out a personal loan, which is another type of installment loan, is another popular and appealing type of loan to take out. Personal loans can help you when travesty strikes and you find yourself in a situation where you unexpectedly need money fast.
Emergencies aside, personal loans can also help you take control of your debt and save money on paying several different and higher interest rates on other bills. Consolidating several smaller debts into one manageable loan may be the best way to pay off outstanding debts and save a bit of money while you’re at it.
In short, installment loans can prove helpful for several different reasons:
- Lower repayment amounts stretched out over a set amount of time
- Regular payments with a fixed amount make debt easier to manage
- Quick answers, you don’t have to wait days or longer to find out if you’ve been approved
- Borrow exactly how much you need
Credit isn’t always the enemy, you just have to know how to manage it.
