When people need to make a major purchase but don’t have enough money to do so, they often turn to a financing solution. One of the best choices ccould be an installment loan.
Definition of an Installment Loan
An installment loan is a very common type of loan used to finance a variety of purchases. No matter what the loan is used for, the installment aspect of this type of financing means that you need to pay the loan back – plus interest – on a regular basis, usually monthly. In other words, you pay back your debt in installments until it is retired.
Installment loans are different from revolving-credit loans such as those obtained when you use a credit card. In an installment loan, you can’t get more money unless you take out another loan. With a revolving-credit situation, you can make continuous purchases up to the point when you reach your previously established credit limit.
Types of Installment Loans
Installment loans are taken out to fund a wide variety of purchases. Here are a few of the common types of these loans:
- Auto Loans. Used for the purchase of new or used cars and trucks.
- Personal Loans. Used by consumers for a wide spectrum of needs.
- Student Loans. Used to pay for educational expenses, generally undergraduate or post-graduate college courses.
- Mortgages. Used to buy a home or other real estate.
How To Obtain an Installment Loan
Installment loans are offered by many lenders including banks, credit unions, and financing agencies. In most cases, you will fill out a loan application indicating why you want the loan. You will also need to provide details about your personal financial situation. The lender will review your creditworthiness from their perspective. Then, the lender will inform you whether you have been approved for the installment loan or not.
Some lenders are much easier to work with than others. MaxLend installment loans may be a good choice for your specific situation.
Savvy Tips about Installment Loans
Installment loans come with pros and cons that need to be thought through before applying for financing. Some of the advantages of installment loans include:
- You can finance large-ticket purchases that you would be unable to otherwise make
- Your installment amounts will generally be the same or nearly the same each month
- In most cases, you can pay the loan off early, saving money on interest-rate expenses
On the other hand, you need to be aware of the following:
- Installment loans can be costly during times of high-interest rates
- You may be tempted to take on more debt than you can handle
- You could hurt your credit rating if you miss a regular payment
Installment Loans in Review
An installment loan can be an excellent choice for many people who have insufficient funds for a major purchase. As with any form of borrowing, there are advantages and disadvantages to consider. Many lenders offer installment loans. It is a good idea to shop around to learn about your best options.