(Jul. 28, 2020) — One of the common options for people trying to find cash for larger expenses is an installment loan. This type of loan comes in many different varieties, like car loans, personal loans, and mortgages.
It only means that you have many options to select from when looking to find a financial solution that fits your lifestyle and budget. Is taking out an installment loan best for your finances? Do read an article on installment loans online to know more.
For a little help, here are some essential things you need to know about installment loans. Take a read!
What Is An Installment Loan?
Installment loans are a type of loan for which you receive the borrowed cash in one lump sum and reach an agreement about making pre-determined payments every month over a set period until you have paid off the debt.
Compared to credit cards or a line of credit, an installment loan has a fixed end date. That said, if you make timely payments, you can know in advance when you can fully pay off the loan.
The significant differences between installment loans typically boil down to the collateral you use to make the loan secure. Say, for instance, if you obtain a house loan, the collateral would simply be the property. On the other hand, if you take out a car loan, the collateral would be your car.
The only exception is unsecured personal loans. In this type of installment loan, collateral is not required. Instead, lenders depend on the strength and extent of your credit score to get the best possible interest rate.
In most cases, no matter what kind of installment loan you are applying for, lenders will scrutinize and inspect your credit score to decide if they will lend you cash and what the interest rate will be.
Also, lenders could ask for your work history and income information. Moreover, if you find it hard to be eligible for a loan and have poor credit, please consider getting credit repair services. These services can help you repair and fix your credit so that you can be eligible for a loan.
4 Types of Installment Loans
For the most part, there are four common types of installment loans you should know, below are the following:
- Student Loan. If you need extra money to cover some expenses at school, know that you can apply for both private and federal student loans. The latter is granted or handed out through the government and might have perks like income-driven repayment plans and fixed rates. On the other hand, private student loans are issued via credit unions, banks, and other financial institutions. The interest rates rely on your credit and could be fixed or variable.
- Car Loan. A car loan makes use of a vehicle as collateral against the loan. Just like other types of installment loans, you will need to determine first what monthly payments you can pay and how lone you want to be in debt. It is wise to inspect your credit score before looking to apply for car loans. This way, you will have an estimate of what interest rates you can qualify for.
- Personal Loan. This type of installment loan is used to pay any expenses. The most common is debt consolidation. Since installment loans have a predetermined end date, borrowers who are struggling to repay their debt can merge it into one loan. It’s especially helpful and beneficial if interest rates are high. Being eligible for a personal loan with a low rate can help you repay your debt much sooner.
- Mortgage. A house loan is a personal loan that makes use of the property as collateral. For the most part, there are different types of house loans. However, there are common features that you need to know to compare which mortgage is right for you. These features are adjustable or fixed rate and term length.
Where To Find Installment Loans Online
You can find many online lenders that offer installment loans from the luxury of your home. Before you apply for an installment loan, keep in mind that it is wise to compare interest rates at various creditors.
When estimating your interest rates on many different installment loans, take note that most online creditors will typically conduct a soft credit inquiry to provide you an estimated interest rate.
A hard check could adversely affect your credit score and is deemed by credit reporting agencies as an endeavor to access more credit. That said, when you are comparing lenders online, ensure that each creditor is not doing a separate hard credit pull to estimate your interest rate.
Regardless of what kind of installment loan you want to apply for, there are many factors that you can compare. These are the term of the loan, cost of the loan, early repayment fee, and flexible payment dates.