Installment loans come in handy if you need large sums of money to finance an investment. Nonetheless, these loans are not always the best because their terms and conditions vary. If you feel that an installment loan is not ideal for your situation, there are various alternatives you can explore. This article looks at the 4 alternatives to installment loans so you can understand the options available to you.
- Lines of Credit
Personal lines of credit, although not available with every lender, are a worthwhile alternative to installment loans. The good thing about this option is that it offers so much flexibility as compared to installment loans and the interest paid is often lower than a credit card. A personal line of credit also allows you to spend on what is needed during the draw period, making it possible for you to partake in interest-only payments. Nonetheless, like some loans in Utah, you may have to provide collateral, especially when borrowing large sums of money.
- Credit Cards
Credit cards are often difficult to manage if you cannot control your spending. However, since they offer numerous perks including travel rewards and cash back, they are recommended if you can use them for the right purpose. With credit cards, the best way to avoid paying high-interest rates is by ensuring you pay back within the billing period. If your balance at the end of the month is low, then you’ll pay lower interest, making it possible to leverage the perks without necessarily incurring exorbitant rates.
It’s imperative to note that the best cards with the highest rewards often have a steep annual fee. These are ideal if your credit score and income are sufficient and if you are planning to spend regularly to benefit the most from the rewards. If that is not the case, you need to ascertain that the benefits of credit cards outweigh the annual amount you’ll pay before you can apply for a credit card.
- Home Equity Lines of Credit (HELOC)
This is suitable if you are hoping to cater to some series of major expenses including school tuition and home renovations. Most Home Equity Lines of Credit come with a 10-year draw period, giving you sufficient time to spend as needed. Furthermore, with this option, you are allowed to borrow up to 85% of the home’s equity, making it ideal for those who have a property investment. A drawback to HELOC is that your property is collateral, which means if you are unable to pay, your lender can pursue to meet the delinquent balance.
- Peer-To-Peer Lending
This is an alternative to traditional lending. Peer-to-peer lending platforms link borrowers to investors willing to lend funds. Loans acquired from this route can be utilized for various purposes and often come with a lower rate of interest compared to traditional loans. Before applying, make sure you read through the terms and conditions to understand the risks involved.
This article has examined 4 alternatives to installment loans. Before applying for any of these options, it’s imperative to first understand the terms involved so you can know what you are getting yourself into.