There are many types of loans available for individual borrowers. Each type has different benefits and drawbacks, as well as different reasons for its use. Here are four things you should know about one type, installment loans.
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1. What They Are
An installment loan is a fixed monetary amount that a borrower is required to repay in regular increments. Repayment typically occurs monthly, but the schedule is agreed upon when the borrower is approved. The payment amount depends on the loan’s interest rate and term and how large the loan is. With an installment loan, the repayment amount remains consistent. This makes installment loans easier to incorporate into a budget.
2. Where To Apply for Them
Most lenders offer installment loans. You can speak with a representative of your bank or credit union or search for options online by typing in the name of a lender and the key phrase installment loans. For example, you could type MaxLend installment loans into your search engine. Make sure the lender you want to work with has experience in lending installment loans and can answer any questions you have.
3. How They Work
An installment loan can make it easier for you to pay for large purchases, such as tuition or a vehicle. This makes it similar to a credit card and other types of revolving credit, but there is one key difference. Revolving credit involves an upper limit of available funds, but no restrictions on how you use those funds. An installment loan, by contrast, is one lump sum that you borrow at once. You must use that sum for your intended purchase. For example, you cannot use a student loan to purchase a vehicle.
4. Types of Installment Loans
There are two main categories of installment loans: secured and unsecured. A secured loan requires collateral while an unsecured loan does not. A large number of well-known loan types are actually installment loans. Student loans, auto loans, mortgages and personal loans are all considered installment loans. Buy Now, Pay Later (BNPL) loans are also considered installment loans because you can make a large single purchase, such as a sofa, and pay for it in small increments, rather than paying in full at the time of purchase.
5. Why You Should Apply for an Installment Loan
There are many reasons to apply for an installment loan. If you want to make a large purchase, such as a house or a car, or attend college or university, then you will likely need to apply for a loan. However, you may also choose to apply for a loan to improve your credit score. Taking out a personal loan and making payments toward it on time can help you build your credit and show that you can be responsible with money and credit.
When you apply for any type of loan, make sure the one you choose is the best fit for your needs. Research the types of loans you’re interested in before making any decisions.