Installment loans essentially allow borrowers to access a predetermined amount of money that is disbursed in a lump sum and repaid over a set period of time. These loans typically come with fixed interest rates and also require borrowers to make consistent monthly payments that remain the same for the entire life of the loan.
This means that whenever you obtain installment loans online, you will always know what to expect when the time comes to pay off your monthly bill. This is in contrast to most other loans, like credit cards or lines of credit, that typically come with variable interest rates and flexible repayment terms.
What Are The Different Types Of Installment Loans?
Installment loans tend to come in a wide variety of forms, and while they mostly operate in the same way, each type has its own unique features, purposes, and interest rates. In this respect, some of the most common types of installment loans include:
Personal loans are an unsecured form of installment loans that are often available in amounts that range from as low as $1,000 to as high as $100,000. On average, they also come with a repayment period that hovers between two and seven years, with interest rates that typically vary from 6% to 36%.
In most cases, you will need a good credit score to qualify for a personal loan, especially if you borrow from a traditional lender like a bank. However, you can also apply for these types of loans from online lenders that are open to borrowers with less-than-stellar credit histories.
It is also for this reason that online credit broker services exist, with US Installment Loans co-founder Owen Wilcox recently stating, “We currently have over 100+ loan providers in our network, which ensures that borrowers of all credit types are able to find a suitable lender in a matter of minutes.”
A mortgage is another type of installment loan that involves borrowing the value of your house and agreeing to repay it with interest every month, typically over 15 or 30 years. Since this type of loan is secured by the house, you will usually be able to access lower interest rates, but if you fail to make your payments on time, there is a high chance that the lender will foreclose on your home before selling it to recover their losses.
If you’re in the market to purchase a new car, securing an auto loan can help you cover the remaining balance that you may be lacking. These loans are usually meant to be repaid over the course of a few years, with your interest rate being determined by the size of the loan, your credit score, the value of your vehicle, and the length of the loan.
They are also similar to mortgages in that they are secured loans. This means that failure to make your repayments on time will result in your car being repossessed.
How Do Installment Loans Work?
The good news about most online lenders, like those in the US Installment Loans network, is that they are usually open to providing loans to borrowers with poor credit.
This is because they are usually interested in knowing if you have a steady source of income that will ensure you can make your monthly payments on time. However, it always helps to have a good credit rating, as this often affects the type of APR you get. The higher your credit score, the lower your interest rates will be.
When it comes to applying for these loans online via a site like US Installment Loans, you will usually need to fill out a pre-approval form by sharing a bit of personal and financial information such as your bank account info, employment information, contact information, social security number, etc.
If approved, you will be presented with multiple loan offers that you can then compare to find the one that best fits your budget and requirements. If you accept a loan offer, the funds will be deposited directly into your checking account in as little as 24 hours after approval.
In regards to repayment, you can usually make your payments through automated monthly deductions, as this is generally how most online installment loans are paid off. This is also a good way to ensure that you don’t end up missing a payment, which can help you improve your credit score.
Where Can You Obtain Installment Loans?
Installment loans can often be obtained from a wide variety of lenders, such as credit unions, banks, and online loan providers. However, if you happen to have a poor credit score, you are more likely to be able to secure funding from an online lender.
In fact, most online lenders tend to offer borrowers more competitive rates and terms because they usually don’t need to cover the same overhead costs that most brick-and-mortar lenders do. Plus, using an online credit service like US Installment Loans can allow you to easily prequalify with a wide variety of lenders to find the best rates and terms.
On top of that, the online loan application process is usually faster and easier to handle, as there are no waiting times or extra documentation needed to apply for funding. In most cases, you can apply for an installment loan and expect to receive a decision on it within the same day.
How Do Installment Loans Impact Your Credit Rating?
Installment loans often require lenders to carry out a hard credit check on your report, which can often end up lowering your credit score by a few points.
Aside from that, these types of loans are the best at strengthening your credit as long as you always make consistent, on-time payments. Most installment loan providers will typically report on-time payments to major credit bureaus, but do keep in mind that missed or late payments will also be reported.
In fact, a missed payment can take almost 100 points off your credit score. It is for this reason that you should work with your lender to set up automatic payments, which should reduce the risk and pressure of failing to pay.
Is An Installment Loan A Good Idea?
Before you decide to get an installment loan, it is important that you weigh all the pros and cons. For instance, an installment loan can allow you to refinance a high-interest debt, which can be beneficial. Plus, it is a better option than using a credit card or line of credit since they come with a fixed monthly payment.
However, if you aren’t sure how much money you need, then an installment loan is not the best option, as you will only be able to access a fixed sum of money. On top of that, failure to make your repayments on time can cause serious damage to your credit rating. This can end up complicating your chances of securing future credit.
In short, make sure that you have eliminated other alternative options like friends and family before taking out any type of loan. And if you do decide to get an installment loan, only accept a loan offer you are confident you can afford to avoid falling into bad debt.