Almost everyone has heard the term installment loan but not as many people really know what an installment loan is and why so many consumers find them useful.
With an installment loan you borrow the money that you need, for whatever reason for the most part, and then you pay it back to the lender over a longer period of time.
This is unlike a payday loan which all must be paid back in a very short period of time. Having a longer period of time to pay the loan back is one of the biggest advantages of installment loans and why they are so popular with many consumers.
How to Qualify
Installment loans are not very hard to qualify for in most cases. You need to have a steady source of income that you can verify. This does not mean that you need to have a job, just regular money coming in which could be a disability check, Social Security payments or even a support check. And that income needs to be enough to make the payments on the dollar amount of the loan that you are requesting. You also need to be at least 18 years old and you must reside in the state where you are requesting the loan. You also need to be aware that the lender will be looking at your credit score to help them to determine your creditworthiness. If you have borrowed excessively in the past and failed to repay the money then they will be less likely to lend money to you. Some lenders will also consider your most recent payment history and give that more value than your past repayment history. So if you have improved your payment strategy recently then you still have the option of getting a loan. If you have questionable credit you will want to research which lenders in your area are more lenient about lending to a consumer with a lower credit score.
How it all Works
You need to apply for an installment loan just as you would for any other type of loan. In most cases, you can now complete the application online. This is very helpful because most of the websites offer a handy tool that is called an installment loan calculator. What the tool does is it lets you see what your payments will be on a specific loan amount if you pay it back over different loan time frames. Obviously, if you select a shorter term for the loan then the payments are going to be higher each month. But this tool lets you try different time frames to determine which payment amount is going to be best for your budget so that you can repay the loan without any difficulty. Most lenders will fulfill loan requests that are between $3,000 and $50,000 but again the amount that you will be offered depends on your income and ability to repay the loan.
Even though the application process is simple and fast, there is still the process of signing the papers for the loan. As with any loan, you are entering into a legally binding contract and you need to read the document completely and understand it before you sign it. In the document you should find clearly stated the length of the loan, that is how many payments you will make, and the interest rate that you will be paying. Again, your credit score and payment history can have an impact on the interest rate that you are going to pay. If you feel that the rate is too high then don’t sign the contract and explore borrowing from another lender.
Key Advantages of Installment Loans
Most consumers hate to deal with a bank. It seems like even the simplest task always takes forever at a bank. You sit and wait and then have more and more forms to fill out. Then you wait days or even weeks to get an answer. But one of the advantages of installment loans is that they are much faster to apply for, you often know right away that you have been approved and you get your money much faster. One reason that the process is so much faster is that installment loans have fewer criteria that you need to meet to qualify for the loan. Consumers also like the fact that they can borrow just about whatever amount of money that they need on an installment loan. Your needs determine the loan amount and not some loan officer at a bank.
A really great benefit to installment loans is the fact that you can decide how much you want to pay back each month when you set up the loan. Using the loan calculator feature lets you see what the payments will be for different loan lengths and helps you to select the terms that will best work within your budget. An installment loan simply offers you more flexibility in every aspect of borrowing money than most other types of loans. It puts you in control and lets you find the best terms to meet your needs. Finally, one of the biggest advantages of installment loans is the time that you are afforded to pay the money back to the lender. It lets you borrow a larger amount of money and then gives you the time that you need to pay the money back without destroying your monthly budget. Installment loans are great for larger unexpected expenses like a major car or home repair. You can get your money quickly and then have time to pay it back in a manageable amount each month. You just need to use this financial tool wisely and it is a great way to get the money that you need. And an added bonus is that each payment that you make on the installment loan is helping you to establish your credit and payment history or improve your current credit score to make future loans even more affordable.