Installment loans could be a real game-changer, especially if you need flexible repayments. I like installment loans because you will get a tremendous amount of cash and repay in small bits.
In these difficult economic moments, you find that you will need some cash at some point. And that’s why you need to know about why use installment loans.
So,
What are Installment Loans?
Installment loans are the loans you take in lumpsum amount then repay in small bits. If a lender allows you to make monthly or biweekly payments, that means you have an installment loan.
We call each payment an installment, and it entails some percentage of the principal amount and the interest.
Installment loans can be secured or unsecured loans. A secured loan is a loan you take against your property. To get a secured loan, you must provide collateral before the lender qualifies you. In addition, the lender needs to confirm the ownership of the property to ensure that it’s your property.
In contrast, if you take an unsecured personal loan, you don’t need to provide any property as collateral before qualifying for a loan. Instead, the lender requires you to prove that you can repay the loan without much struggle.
What are the Benefits of Installment Loans?
You can Make Big Purchases
Once you take an installment loan, buying large items is easy since you take lots of cash. For instance, it’s possible to purchase a car with an auto loan. Once you apply for an auto loan, the vehicle becomes the collateral.
In addition, you can take a mortgage loan to purchase a home and pay later in small amounts for 15 to 30 years. That said, it’s impossible to get a short-term loan to make big purchases.
However, you can take a personal installment loan that is enough to buy a car or any other big service.
You will be Sure of your Monthly Payments
Once you take an installment loan, the payment stays constant throughout the loan term. Therefore, the lender has no chance to increase or reduce your installment amount during the loan term. Thus, the repayment will stay constant unless you request a loan restructure.
As a result, you can plan your paycheck well to get some funds to save. In addition, you can budget wisely and manage to do other things during your loan repayment.
You can pay off your loan early
If you can afford to repay your loan before the agreed time, you can do it with installment loans without any additional charges. However, it would be best to talk to your lender first before making early repayments.
Remember that some lenders will charge you early repayment fees. So, you must be sure that your lender is not among such lenders.
You will not have pressure to pay off your loan
Depending on the loan amount, you can even pay off your loan for six years with installment loans. Therefore, you will not strain much during the repayments since it’s a small amount for each refund.
For instance, other loans like payday loan lenders need you to repay your loan in total plus the interest at the end of the month. That’s why you will find that most people default on payday loans.
You can get better rates with a good credit score
If you have a good credit score, you can access better interest rates with installment loans. For instance, if you take an installment loan at Heart Paydays, you can access a rate of as low as 5.99%. However, those with low credit scores can get high rates but not exceed 35.99%.
The total loan amount will not be that huge if you get better rates. And therefore, you will pay off the loan faster.
You can take Installment Loans to Build your Credit
If you are on the wrong side of your credit score, you can take an installment loan that will help you to build your credit. Most installment loan lenders report your credit history to one of the three credit bureaus. As a result, if you continue to repay your loan on time, you will manage to build your credit score.
Installment loan lenders are good than payday loan lenders who cannot help you rebuild your credit score.
Installment Loans Consist of High Loan limits
With installment loans, you can access higher loan limits than short-term loans. For instance, if you take a payday loan, you cannot exceed more than $2000 since you will repay at your payday.
With installment loans, you can get loans of up to $50,000 or more, provided that you meet all the requirements that the lender needs.
My Take
It’s good to take an installment loan, but I would recommend you create more income streams that you can use to repay the loan. For instance, if our primary source of income goes down, you can comfortably repay the loan using other means. Otherwise, you will enter into the wrong credit side once you start to repay late.