In the last few decades, the lending industry has really grown. Now, when in need of financial assistance, borrowers can choose from a number of loan options. One of the most popular loan types which has attracted all kinds of borrowers is an installment loan. What makes this type so popular among borrowers is the fact that installment loans include a lot of different types of loans. Installment loans may include payday loans, mortgages, vehicle title loans, loans from insurance policies, consolidation loans and many others. A lot of these loans fall into the category of installment loans because the repayments are usually in equal amounts over a scheduled period of time. In this article, we will explain what an installment loan is and how it works. We will also look at some of the most popular installment loan types and when it is a good idea to take out an installment loan.

What is an installment loan?

Installment loans are loans which allow the borrower to take out a certain amount of money and then repay it in equal amounts (or installments) over scheduled time intervals. Normally, the payments have to be made once every month. Most people believe that installments loans are considered a lot more affordable and usually safer than standard payday loans.

The length of an installment loan time period can vary from 5 to 30 years. A normal practice when taking out an installment loan is for the borrower to secure the loan with his personal property. Installment loans, like other popular loan types these days, are available to borrowers both at physical stores and online.

Installment loan typesneed-installment-loans

Student installment loans

Student installment loans provide a specific plan that covers your costs of education. After you graduate, you will have to start repaying the loan in fixed installments at the end of every month. With student installment loans, borrowers have also the option to defer payments for a period of time if they are out of a job. Once the borrower finds a job, he must continue with the repayment process.

Vehicle installment loans

There are many reasons why you may need a car. It could be that you are starting a new job and the office is far away from your home. Whatever the case may be, if you don’t have enough money to afford a car, taking out a vehicle installment loan is a pretty good option. The only thing you need make sure is to be able to make your payments. Otherwise, you risk losing your new car.

Secured installment loans (mortgage)

We all know the American dream of having your own home. And buying a house is difficult – it is almost impossible to do so without taking out a loan. Many loan lending companies out there offer that kind of assistance, so before you make a decision, you should do research and find a reliable lender to work with. By taking out a mortgage installment loan, you will be able to buy your dream house. The length of a mortgage installment loan can be more than 30 years. Again, like with taking out a vehicle installment loan, you must make your payment on time or your property will be at risk of being taken away. Not making your payments on time can also damage your credit.

Unsecured Installment loans

Normally, you can take an unsecured installment loan for a smaller amount of money and a higher interest rate compared to the other types of installment loans. That, however, does not stop unsecured installment loans from being the most popular installment loan type, as they attract borrowers with their less stringent loan requirements. The main advantage is that you can get one even if you have a bad credit score. In many cases, your credit history is not even being checked. Unsecured installment loans are usually for a time period of less than 5 years.

Installment loans advantages and disadvantages

Installment loans, like any type of loans, have their advantages and disadvantages. Knowing their strong and weak aspects can help you make a better decision.

Installment loans advantages

  • Long loan period
  • The length of your installment loan term period can be as long as 30 years.
  • Scheduled monthly payments

By taking out an installment loan, you get a fixed interest rate on your loan. That means that your payments (installments) will remain the same throughout the whole period of the loan, making it a lot less complicated to budget and structure your expenses as you know exactly how much you are going to have to pay at the end of each month.

  • The service is quick and simple

Getting an installment loan at an on-ground store or online is very quick and simple. Normally, it takes no more than a couple of days to get the money transferred into your bank account once your installment loan application has been approved.

Installment loan disadvantages

  • Missed repayment penalties

With installment loans, not making your repayments on time can get you into lots of trouble along the way. It is a risk that you must be prepared to take if you decide to apply for one.

  • High interest rates

We have mentioned that installment loans are generally considered to be less dangerous than standard payday loans. However, that does not mean that their APR cannot be high. Sometimes, it may cost even more than a standard payday loan.

  • You out your personal property on the line

Some types of installment loans require you to use your property as collateral. That makes this kind of loans very risky as you could losing your home or car.

In conclusion

Taking out an installment loan can be a great way to ensure your financial stability. Installment loans, like any other type of loans, have their risks, so you must be careful when making your decision. Don’t forget to do thorough research on loan lending companies before you choose the one to work with.

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