What Are Types of Installment Loans?
Installment loans are a form of lending that is meant to be repaid with a series of monthly payments. As a result, they typically come with a fixed interest rate with each monthly payment remaining the same throughout the life of the loan. In this respect, the larger the loan amount is, the longer the term to repay will be.
Installment loans can be accessed from a variety of places such as banks, credit unions or direct lenders. If you don’t know how to find reliable lenders for your loan needs, you can turn to WeLoans, a broker who is famous for payday loans for bad credit with no credit checks, which can connect you to a panel of reliable lenders in the industry.
Before you get any installment loans for bad credit at WeLoans, you need to know that these loans are also available in a wide variety of forms. And while they do operate similarly, each one comes with its own different features, purposes, interest rates and repayment periods.
Some Commen Types of Installment Loans
- Personal loans
A personal loan will usually need to be repaid in monthly installments over a set period of time at a fixed interest rate. These are the most common types of installment loans and they are usually available from banks, online lenders and credit unions. They allow borrowers to access high loan amounts, which is why they tend to be used to fund large expenses such as home improvements or debt consolidation.
Furthermore, the repayment terms for these loans tend to range from 24 to 60 months, with some even going all the way up to 72 months. And while these loans are typically accessible only to those with a good credit rating, there are online lenders that provide personal loans to those with bad credit. You can find your loan options at WeLoans for your financial needs.
Mortgages are another common type of installment loan that is used to purchase a home and is also secured by it. In most cases, these fixed-rate loans come with an extended repayment period of 15 to 30 years and often come with low interest rates. However, since the repayment periods are long, the cost of repaying these loans can often prove to be expensive in the long run.
- Student loans
These loans are designed for use in paying higher education costs and tend to be available from both private lenders and the federal government. Unlike most other installment loans, student loans don’t need to be repaid straight away, as you can wait until you have graduated and secured a paying job. However, it is important to note that federal student loans typically have borrower protections and their rates are not dependent on credit, unlike private student loans.
- Auto loans
Auto loans are another popular type of installment loan that involves making a down payment on a new car, and then financing the balance with an auto loan. The fixed monthly payments will then be made to the lender until the entire loan is repaid in full. Failure to make these repayments will result in the car being repossessed, as the lender seeks to recover the money owed to them.
- Buy now, pay later loans
These are a form of short-term financing that enables you to make purchases and then steadily make small repayments for them at a later date. These loans are especially common nowadays, with many companies offering this as a payment option for retail goods and products.
However, the downside with these loans is they often create a false illusion that the products are less expensive than they actually are. As a result, it can be easy to find yourself getting caught up in overspending.
How Does An Installment Loan Work?
Similar to any other type of loan, before you are able to borrow an installment loan, you will first need to qualify. This means having a good credit score, unless you are applying for a secured loan, in which case, you will need to put something up as collateral, e.g. a house or car.
If you decide to get installment loans for bad credit with WeLoans, then you need tol fill out and submit an application form, which the lender will review. If the loan provider decides that you fit their requirements, then they will approve your loan request. When it comes to funding, the timing will often vary depending on the lender, but some loan providers can deposit the funds within a day or two of approval.
Once you receive the cash, you will usually need to start repaying the loan, with interest. This means that you will ultimately end up paying back more than the amount you originally borrowed.
How Much Can You Borrow With Installment Loans?
Typically, you can access high loan amounts that can range from hundreds of dollars to tens of thousands of dollars. However, the amount of money you can access when borrowing an installment loan will usually vary depending on a number of factors such as the lender, the type of installment loan, as well as your level of creditworthiness.
What To Consider When Borrowing Installment Loans?
Before signing any loan agreement, it is important that you take into consideration a number of factors when borrowing an installment loan. For starters, the good thing about installment loans is that the monthly payment and interest rate don’t change throughout the entire loan period.
This should make it easy to budget for your repayments. Furthermore, if you always make on-time payments, taking out an installment loan can often prove to be a great way to improve your credit rating. It shows creditors that you are responsible and can be trusted with any credit that is extended to you.
In addition, installment loans are ideal for dealing with large expenses that you may be unable to afford like a new car or home renovation, instead of being forced to save for years. Plus, these loans make it very easy for borrowers and lenders to understand how they are meant to be issued and repaid.
On the flip side, while these loans make it possible to pay for big-ticket items, this doesn’t change the fact that they are a monthly obligation. In other words, if you cannot afford to keep up with the payments, there is a high risk of damaging your credit or even losing any collateral you may have put up.
Moreover, these loans are not suited for those borrowers that may not know exactly how much money they need and when it will be needed. This means that once you take out an installment loan, you will not usually be able to take out additional loans until it is fully repaid. In such situations, a form of revolving credit, like a credit card may be preferable, as it provides more flexibility.
How To Secure An Installment Loan?
There are several financial institutions such as banks, credit unions, and online lenders that offer installment loans. Every lender will usually have their own approval process and requirements. However, it is common for your credit score, debt-to-income ratio, and even income level to be taken into consideration.
If you happen to have a bad credit score, you should consider using a credit broker service like WeLoans. With this broker, you can find different lenders for your favorable installment loans that fit your budget and requirements.
Plus, it’s preferable than applying for multiple loans at once, as too many hard credit checks at once will end up lowering your credit score.