Taking a loan is always a great option when you are looking to handle an emergency or work towards your dreams. However, it is important to carefully consider the decision to borrow money before applying for funding. Over the past few years, there has been a steady increase in the number of lenders to whom potential borrowers can turn.
Since it is important to ensure that genuine borrowers are protected from unscrupulous lenders, there was a need to set up a code of conduct to promote best practice. We also saw the need to make personal installment loan shopping easier by helping consumers find reliable lenders. Part of our mission includes providing knowledge so that consumers make informed decisions. Here are a few things you may want to know before taking installment cash loans.
Personal Installment Loan Definition
The actual definition or personal installment loans are a type of consumer loans that are paid back over time on a fixed schedule. The principal and interest are repaid in scheduled intervals, with the term of the loan ranging from a few months to as long as 30 years. A personal installment loan can be used for a variety of purposes. Compared to other types of loans such as payday and title loans, installment loans are seen are a safe and affordable alternative.
These loans can be unsecured, meaning that the repayment is guaranteed by your promise to pay as opposed to a physical asset. This has made personal installment loans accessible to low-income consumers and borrowers with poor credit. The flexible nature of the loans and predictable payments also make them ideal when you need quick cash to cover unexpected expenses.
If you need an installment loan, and know all about them already, you’re probably here because you’re looking for a lender.
If you don’t know all that there is to know about installment loans, we recommend you keep reading. It’s much smarter to find out all you can and then come back here to make an informed decision, rather than rushing and making a wrong one.
Types of Installment Loans
Exploring the world of loans can be confusing. Whenever you need money for any type of project or use, personal installment loans can come in handy. While most of these loans are unsecured, others will require a physical asset to guarantee repayment. A secured personal loan is easier to obtain because it is backed up by a valuable asset, making it less of a risk to the lender. There are various types of loans to consider. Having said that, you can only take out this type of loan if you have the required asset to put up as collateral.
On the other hand, unsecured personal loans do not require you to have any form of physical security. The downside is that the loans present more risk to the lender. As such, you have to have a good credit rating and a steady stream of income to obtain them. These loans also tend to attract significantly higher interest rates, making them costly.
Debt consolidation loans allow you to pay off several liabilities and consumer debts using a new loan. Some of the existing debts you may want to repay include medical debt, credit cards, or other personal loans. As the name suggests, the loans let you consolidate a number of payments into one monthly payment. These loans can be secured or unsecured, depending on the lender and your credit rating.
The lender may also require that the borrowed funds be used to pay off the existing debt to reduce the amount of debt you have. Loan amounts, terms, and interest rates vary from one lender to another.
You can take out an auto loan when you need a car but are not able to pay the full amount upfront. In most cases, these loans will have a term ranging from 12 to 96 months, with fixed monthly payments, so you know how much you owe every month. While you may end up paying more for the car due to the longer loan term, you will enjoy the convenience of owning a car sooner. One of the dangers of auto loans is that the lender could repossess the car if you do not make payments.
Most people dream of owning property at some point. However, buying a house makes for a huge investment, making this dream beyond the reach of many. If you do not have the money to buy a house outright, you could consider applying for a mortgage. There are different types of mortgages, with most loans having a term of between 15 and 30 years with monthly repayments. Mortgages with fixed interest rates have standard monthly principal and interest payments, while those with varying interest rates have fluctuating monthly installments. In case you do not make payments on this type of loan, the lender can foreclosure your house.
Student loans are a special type of personal installment loans. You will receive a given amount of money while actively enrolled in school, and start making payments when the grace period ends after graduating. Like with other installment loans, there are different types of student loans available. Some have fixed interest rates, while others vary. It is important to note that interest on these loans accrues after the grace period ends. This means that if for some reason, you are unable to make payments, the monthly payments may end up being larger than they were previously.
This type of loan helps you finance your wedding expenses. Most wedding finance loans do not require collateral to obtain, but borrowers need to have good credit to qualify. The loan amount will depend on the credit qualifications of the borrower, income as well as the term length. Apart from traditional lenders, some rental halls and third-party lenders also provide this kind of financing. This is why you should invest time and thought before taking out the loan.
Vacation loans allow you to borrow money to travel. These personal installment loans can either be secured or unsecured. The secured loans are backed up by home equity and are generally affordable. On the other hand, the unsecured type has higher interest rates. Regardless of the type you choose, you have to have a steady income and good credit rating as proof of your ability to repay. Compared to using credit cards overseas, vacation loans are less expensive. The money obtained can be used for a wide variety of needs.
Medical emergencies can be difficult to handle if you do not have the amount of money required to settle the bills. This is why some people opt to take out a personal loan to pay off the related expenses. However, taking out such a loan will be more costly than paying the medical bill outright. To increase your chances of qualifying for the medical loan and borrowing larger amounts, you should have a steady income and a good credit score. With a large number of lenders in the market, you should compare interest rates before making a decision. In case you are behind on debts, debt consolidation can help reduce the financial burden.
Home Improvement Loans
Once you have lived in your house for several years, you may want to make some changes. Whether you are looking to make it more comfortable or functional, home improvements will offer you numerous benefits. If you want to put up the property for sale, a home improvement loan can help you add value to your property. This will allow you to make repairs and upgrades, allowing you to repay the loan in full once you sell the property. While it is possible to obtain such a loan without collateral, using home equity to back up the loan presents a more affordable option. This would be particularly important to consider if you are applying for large amounts.
Co-signer Personal Loans
You may find it difficult to get a personal loan if you have a low credit rating. However, there are a number of options that may be open for you. You can get someone with a steady income and good credit score to help back up your loan. This means that the second borrower may also be held responsible for the debt. To increase your likelihood of securing funding, the co-signer should have a better credit score and history than the borrower. The loan term, interest rate, and borrowing amount will depend on the qualifications of both individuals.
How Can I Get an Installment Loan with Bad Credit?
It is normal to find yourself in need of some extra cash at some point. When this happens, you can identify a suitable lender and take out a personal loan. However, if you have bad credit, you will need to do some research on installment cash loans for borrowers with bad credit. Although there are a number of lenders who can provide installment cash loans bad credit, it is always advisable to proceed with caution.
The first step would be to familiarize yourself with what constitutes bad credit. You will also need to identify lenders through a third-party who is not in the business of giving loans. Since we help consumers to find lenders easily, working with us will ensure you get unbiased feedback.
The Pros and Cons of Bad Credit Loans
To make an informed decision, it would be important to understand the advantages and disadvantages of these loans. This information will be of great value when making financial commitments.
Generally, bad credit loans are fast to get, with applications being available online and responses taking a few hours. This makes them perfect for when you are in a financial emergency. The interest rates are usually lower than those charged on credit card debt, and the repayment term could be as long as five years. When shopping around for bad credit loans, you will have many lender options. The loans could also provide a chance to improve your credit score if you make payments on time.
Bad credit loans are not without their downside. Since your credit score will project you as a risk to the lender, interest rates are likely to be high. Personal installment loans with bad credit may also contain hidden charges. There is also a good chance that the lender will require you to back up the loan with some form of security. Lastly, some of the lenders in this segment may not be licensed.
How to Improve my Chances of Getting an Installment Loan with Bad Credit
There are several things you can do to increase your chances of obtaining personal installment loans with bad credit. One of the best ways to ensure success is to start before you actually need the money. In case it is not an emergency, you can consider taking the necessary steps to improve your credit score. This will include making on-time payments on your credit cards, ensuring low credit utilization and stopping new credit applications. If you are in a financial emergency, it might help to ask the loan officer for an interview to prove your creditworthiness. Some of the documents you may need during this process include:
• Tax returns from the last few years
• Details of your job history
• List of some of the valuable assets you own
• A list of the unsecured debts you currently have
• Bank statements for your accounts
• Information on whether you receive alimony or child support
There are a number of creative ways through which you can secure funding if you have bad credit. Some of the options available are credit unions, borrowing from family and friends, getting a co-signer, taking a home equity loan, peer-to-peer lending, and online lenders. If you opt for a credit union, it is advisable to approach one that is affiliated with your employer or one that is community-based.
Are Installment Loans Good for Your Credit?
Today, your credit score plays a vital role in determining whether you can access loans. This is why it is important to develop a financial culture that will help build your score. It is equally important to consider the impact personal installment loans may have on your score. Before taking out an installment loan, some of the options you may want to consider include seeking financial assistance from government agencies and nonprofits, requesting for payment extensions from your bill providers and getting side jobs to help boost your income.
How Installment Loans Can Help Your Credit Score
Taking out an installment loan can provide a chance to build a positive credit history. However, you will have to make payments on time for this to happen.
Diversify your debt – one of the main benefits of installment loans is that they help to diversify your loan portfolio. When you have a number of loans open and can pay them off in time, this will have a positive impact on your credit history. Over time, such loans can help to boost your credit score.
Save you money – most personal installment loans have lower interest rates than credit card debt. This means that you will end up paying down the debt faster. In effect, this will not only save you money but also ensure that you owe less debt. Less debt to your name will eventually raise your credit score.
Improve your payment history – one of the important factors that determine your credit score is how punctually you pay off debts. Since most installment loans have predictable payments, you will be in a position to plan for the scheduled payments. These loans present a great opportunity to prove your creditworthiness by making on-time payments. Borrowing a small amount, in the beginning, can go a long way in helping to improve your credit score.
How Installment Loans Can Hurt Your Credit Score
For all the benefits that personal installment loans can have on your credit score, they are not without a downside. Here are some of the ways through which these loans can hurt your credit score.
Proof of missed payments – just the same way they can be proof of on-time payments, installment loans can also be proof of missed payments. Such a record will not only portray you as an unreliable borrower but could also attract additional fees from the lender.
It shows up as a credit inquiry – every time you apply for any kind of credit, the information shows up as a credit inquiry. Regardless of whether or not you get approved, this is likely to lower your credit score. The good news is that you can make on-time payments to make up for this.
Higher debt levels – what happens after you obtain an installment loan will have a huge impact on your credit history. Borrowers who use the money to finance further spending end up in more debt. This eventually makes it harder to pay off the debts, hurting their credit score in the long run.
The effect that these types of loans will have on your credit score will largely depend on your financial behavior and habits. If handled well, these loans can help you boost your credit and organize your finances.
What Is the Difference between an Installment Loan and a Personal Loan?
There are many types of loans available in the market today. This makes it necessary to understand what distinguishes them so you can choose the product that meets your needs. While a personal loan is an unsecured loan meant for meeting current financial needs, an installment loan is a type of personal loan used for emergency expenses or other short-term financial needs.
Generally speaking, personal loans are granted to eligible borrowers who need additional cash to meet a wide range of needs. Consumers can access different types of personal loans, each with its own set of interest rates, repayment term, and other terms. Installment loans, on the other hand, are repaid over a specified period and have a predetermined number of scheduled payments.
Personal installment loans differ from other fast-cash loans in several ways. For instance, while payday loans are repaid in a lump sum on a set date, installment loans are paid back in intervals and regular installments. This means that unlike payday loans, installment loans can extend over several months.
How Are Loan Installments Calculated?
While we can help you find lenders from whom to borrow, you will ultimately be the one to make a choice. To choose the best lender to work with, one of the factors you should consider is how much they are charging you. Most people do not pay attention to the details when applying for personal installment loans. Such people end up paying higher interests than they would have if they did due diligence. There are two main ways of calculating your monthly installments.
Using an Excel spreadsheet
This is perhaps one of the easiest ways to calculate your equal monthly installments. The three variables required for the function are the rate of interest (rate), number of periods (nper) and the present value of the loan (pv). Rather than equated monthly installment (EMI), the function for excel is PMT. The formula to use will then be:
The result you get will either be a negative number or a figure in red. This is because it indicates the cash outflow of the borrower.
Using a mathematical formula
In case you cannot access the Excel spreadsheet, you can use a mathematical formula to determine your loan installments. The mathematical formula is:
EMI = [P x R x (1 + R) ˄ N] / [(1 + R) ˄ N – 1]
Where P represents the loan amount, R is the interest rate per month, and N is the number of monthly installments.
This formula gives the same result as the one obtained when you use the Excel spreadsheet.
Benefits of Calculating Installments
There are many benefits of familiarizing yourself with how loan installments are calculated. This will help you to identify lenders with low-interest rates as well as those with hidden charges. Once you do this, you will be in a better position to choose the most affordable personal installment loans. Knowledge of how much you will be paying every month will also come in handy when making financial plans.
When you calculate the installments before applying for a loan, you will be able to establish whether you can afford the loan. In the end, taking into account the term of the loan, you can find out the amount you will pay as interest on the loan. It would be important to compare your results with the ones provided by the lender.
How to Find Online Installment Loans
There are many institutions that offer installment loans today. Both traditional lenders and online lenders can provide the funding you require to meet your financial needs. However, online lenders tend to have a faster and easier application process. Before submitting your application, you should ensure that you qualify for the loan you intend to take out. This includes having a good credit score, a steady income, and any collateral required.
Work with an Online Loan Broker
An online loan broker is a person who looks and finds the most appropriate loan for you in exchange for a fee. In most cases, you will only be required to pay the application fee if you accept the loan offer. One of the benefits of working with online brokers is that they know some of the best lenders in the industry. At the same time, employing an online broker will help you save the time you would have spent researching on your own. However, it is important to make sure that you select an online loan broker with a good reputation.
Find a Loan Aggregator
An online loan aggregator is similar to a loan broker in a number of ways. However, rather than charging you a fee, they will charge the lender. Loan aggregators focus on matchmaking and will match your lending profile with suitable loans. By allowing you to compare the different options available, this helps to save time and also settle on the most suitable loan for your needs. Just as with a loan broker, the importance of working with a loan aggregator with a good reputation cannot be emphasized enough.
Use Online Loan Reviews Sites
Another option you can explore when looking for online installment loans is loan review sites. When you choose this method means that you will have to use your judgment to determine whether the site is reliable. At the same time, you will have to familiarize yourself with the different types of personal installment loans available in the market.
Thirdly, it would be important to dedicate enough time to find the best products. The online revolution has greatly changed the way individuals and businesses access credit. However, online financing options are associated with a certain level of risk. We simplify the process of finding online installment loans. By researching through us, you will have the assurance that the lender you get is professional. We make the process of finding online personal installment loans easier and quicker for you.
There is no doubt that, when used properly, loans can help you achieve your financial goals. Whether you need funding for your business, wedding, home improvement, or to buy a car, there are a variety of options available for you. However, going through these options in search of what works for you can be cumbersome. It is important to understand what personal installment loans are before taking them out. With this information, you will be in a better position to make the most of the opportunities available to you.
This will not only help in financial planning but also contribute to a good credit score. We aim to help consumers to identify and deal with reliable lenders in the industry. By making your work easier, you will find the funding you need quicker and meet your financial need more effectively.
Also, as a third-party that is not involved in the business of loans, we also work to protect borrowers from unlicensed and unscrupulous lenders. All the lenders we help you find abide by a set code of conduct and are guided by certain guidelines. We commit to ensuring the highest levels of privacy and security of personal information for our clients seeking personal installment loans.
Jennifer is a seasoned finance writer with a special focus on wealth creation and retention. Her pieces have appeared in several leading finance websites and blogs. A creative writing graduate from Southern New Hampshire University, Jennifer believes that proper finance management is a habit, a habit that can be learned through practice and dedication.
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