Everyone needs a little financial help sometimes, but not everyone has a safety net. Installment loans are one option to get money for various expenses. If you are considering an installment loan and would like to know more, keep reading.
What Is an Installment Loan?
An installment loan is a loan you repay in installments. For example, if you borrow $5,000, you get the money immediately. However, you repay it over months or years. Depending on the terms of the loan and the interest rate, you may only have to pay a few hundred dollars each month.
Many banks and credit unions offer installment loans. However, not just anyone can get a loan. You'll need to show that you can easily repay the loan. If you have too much debt compared to your income, you may be denied.
Who Can Benefit From an Installment Loan?
Many people can benefit from installment loans because they cut up the amount into manageable bills. However, they are an excellent idea for sudden emergencies, such as:
- Medical emergencies and procedures
- Vet bills
- Damaged appliance/s
- Home repairs
- Vehicle repairs/upgrades
If you have a big expense you want like a big major appliance, a wedding, or a vacation, an installment loan can make it possible.
What Factors Affect the Interest Rate?
The lender makes money with installment loans thanks to interest. Each month, some of your payment goes toward the loan and some goes to the interest, which the lender keeps. Interest rates may change based on the economy, but your credit also plays a major role.
If you have a history of failing to pay bills, a low credit score, or no credit, the lender may view you as a higher risk. In turn, they'll charge a higher interest rate.
What Are the Benefits of an Installment Loan?
The leading benefit of an installment loan is that it won't break you to repay it. However, on top of that, installment loans can actually boost your credit if you have poor credit or no credit history. Each time you pay the installment on time, it reflects on your credit report and credit score. This can lead to better loan terms in the future, including lower interest rates.
Installment loans are incredibly common because of their benefits. If you need money for a major expense or sudden emergency/disaster, consider an installment loan. If you would like to know more, contact a lender in your area today.
Contact a company like Central Finance to learn more.