If you happen to be browsing for loans and forms of credit online, then you probably have heard of installment loans. But if you haven’t, this article is aimed to enlighten you on what they are and how they work. To begin with many people will use this form of loan and there are many different variations people use. It is a form of a loan where you agree to borrow a set amount of money on the loan. Now it is called an installment loan because you will make monthly installment payments on the loan until it is completely paid off. Unlike other forms of credit such as revolving credit, you take out one lump sum. You can not take out any more money or make your debt larger like forms of revolving credit which include credit cards and personal lines of credit. When you and the lender come to terms with the loan, they will give you a set amount.
Some types of installment loans include house mortgages, student loans, personal loans, and automotive loans too. These will be described and explained as you continue reading.
An automobile loan
This type of loan is typically used when people are purchasing a vehicle. These loans can extend from 12 months all the way to 96 months. Payments are due monthly and typically the longer the term of the loan, the lower payments a person will have. Although a person will have lower payments they will have higher interest they must pay for. If someone were to purchase a vehicle, it would be wise for them to purchase with a 48 month term installment loan rather then a 96 month loan. The longer the loan, the more you pay for the vehicle.
A house mortgage loan
Many people will use installment loans as a method to borrow the necessary money to purchase a house. These people will typically take out a loan for 15 to 30 years in the form of a mortgage. This mortgage will usually have a flat-rate installment monthly payment which includes interest and the principle on the loan. Most of these types of loans do not have fluctuating fees or payments.
A personal installment loan
Many people have chose to use this form of loan to help themselves to get out of debt, to pay for post-secondary education, paying for unexpected expenses and things that include medical bills. Many people will take out a personal loan in the term from 12 to 96 months. The longer the loan period the higher the interest rates because of the fact that personal loans do not require any form of collateral when borrowing.
The good elements of installment loans
For many, installment loans are a good way to get money when it is needed because of the absolutely predictable repayment schedule. It offers many advantages that include a fixed interest rate on your loan and an affordable monthly payment you have agreed too. Sometimes there can be other fees such as add ons which include insurance or things like prepayment fees to pay the debt off sooner. Having a payment schedule that you decide makes borrowing easier, and paying it back a simple process. When you need an installment loan be sure to take out the exact amount you need and be sure you can make the monthly payments. Another great advantage of these is that installment loans are paid off by a specific date and your debt does not grow or get bigger.
The bad of installment loans
Not everything about guaranteed bad credit installment loans is positive. For one example, unlike revolving credit, you cannot borrow more money from your loan. You would have to take out another installment loan to take care of extra expenses. With many loan stores another big problem for many is that the cost of interest rates will depend on credit scores. If you have bad credit or do not have credit at all, this can make payments more expensive at other loan companies.