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In life, it can be hard to predict exactly what is around the next corner. This is especially true when it comes to your finances. You may be on top of your finances one day, and the next you end up with an expensive medical bill, or your car breaks down.
Sometimes, when unplanned financial problems come your way, you need to take out a loan in a hurry. This is where installment loans come in handy.
But exactly how are installment loans used, and how can they help you when you need the money quickly?
In this article, we’ll discuss the uses of installment loans and how they can benefit you when you need them the most.
What Are Installment Loans?
An installment loan could refer to any type of loan that you’ll pay back over a fixed period and across a set number of regular payments.
This is different from a revolving form of credit such as a credit card which allows you to keep borrowing and repaying your debt.
There are several different types of installment loan. These include:
- Personal loans
- Automobile finance loans
- Student loans
For the purpose of this article, we’re looking at personal loans.
When you take out an installment loan, you’ll be required to meet a specific schedule of repayment. You may need to make your payments weekly, bi-weekly, monthly or quarterly to repay the debt.
Installment loans can be for anything from a small amount up to a large sum of money. The repayment terms will generally reflect the amount of borrowing.
The level of interest on an installment loan may be higher than on some forms of personal finance. The interest will often be reflective of your credit score.
Before you commit to borrowing, you should always shop around. Different lenders may offer favorable interest rates meaning you’ll pay less money back. You should also check to make sure that you can afford to make the repayments on the loan.
How Are Installment Loans Used?
One of the best things about an installment loan is that you can use it for almost anything at all. If you are looking for a loan that pays quickly such as an installment loan, then you should look at other forms of finance.
This type of loan is best served covering emergency spending. The types of things that you might use this type of loan for include:
- Covering the cost of any medical expenses
- Repaying overdue utility bills
- Paying for vehicle repairs
- Fixing poor credit
If you’re looking to buy an expensive item with your installment loan, then you may wish to consider taking out another form of finance that is geared specifically to that type of spending, such as an auto loan.
What are the Benefits of Installment Loans?
There are several benefits to installment loans. Firstly, installment loans tend to have a very straightforward application process. Very often, you can apply online in minutes after completing a basic form.
Secondly, you can enjoy flexible repayment terms. That means that you can opt to pay the loan over the length of time that suits you. As the length of the loan changes, so too will the individual payments.
You can borrow a variety of different amounts. Depending on your situation, you could borrow anything from a few hundred dollars to several thousand.
Payment of the loan is often very quick. In many cases, you can get approved straight away and receive the loan in less than a day. That means that you can put the money to good use straight away.
Another benefit of this type of loan is that they are not restricted to people with only the best credit. If you have a lower credit score, then you can still borrow money. This is assuming you can afford to make the repayments and that you have a source of income.
If you have a poor credit score, as long as you stick to the repayment plan and clear your debt entirely in the agreed timeframe, then you may well see an improvement in your credit rating.
Many people take this type of loan out specifically with the aim of improving their credit score ahead of taking out significant lines of credit such a mortgage.
What Are the Drawbacks of Installment Loans?
As with any form of credit, there are drawbacks and things that you need to be aware of.
Once you have taken out an installment loan, you cannot add to the amount that you would like to borrow as you might do with a credit card. The amount is fixed. If you want to borrow more money, then you’ll need to take out a second loan.
When you’re looking for an installment loan, you must know exactly how much you’ll need to borrow before you apply.
If you are someone that has a poor credit score, then you’ll find that your interest rates won’t be as good as if your score was higher. This can lead to higher repayments.
Many installment loans will come with fees. These could include origination fees and late fees. Be sure and read all of the terms and conditions and that you understand all of the fees before you agree to the loan.
Apply for Your Installment Loan Today
Now that you know how are installment loans used, you can get applying. Because this type of loan is available so soon after applying, you can put your money to good use straight away. This type of loan will help reduce your stress levels at times of financial burden.
For more financial tips and advice, be sure to explore the rest of the site.