Information About Installment Loans
When you’re struggling to combat the effects of the worldwide recession, home equity loans can be a useful way to help you raise money. With a huge number of banks and financial companies cropping up in the country, it can be a daunting task to pick up the right loan for the best rates. Still cannot make the decision? Home equity installment loans can be a good option. Installment loans let you pay back in fixed payments over a set period of time. Therefore your total repayment burden is completely manageable.
What Does Installment Loan Mean?
An installment loan is a type of loan that allows borrowers to pay back in installments with a set number of scheduled payments. Monthly payments for an installment loan are fixed throughout the loan term. But the term of an installment loan varies wildly. It can be as little as a few months. That’s what we call short-term loans. The term may be as long as 30 years, namely long-term loans.
Installment loans are a perfect alternative for people who don’t have enough cash at hand to buy an expensive item.
Compared with credit cards or payday loans, installment loans are a much safer and more affordable alternative. The scheduled payments are regular and fixed until the loan is paid in full.
Major Kinds of Installment Loans
Installment loans can be used to make different purchases. There’re several kinds of installment loans based on their uses. You can choose from four options of installment loans that are available in the market currently.
One common kind of installment loans in daily life is car loans or auto loans. They are installment loans that are used to buy a new or second-hand automobile are car loans. Depending on your credit score and income status, borrowers are allowed to purchase a new or used car with no or low down payment. You just need to make regular payments each month. But if you default on your payments, the lender will repossess the car.
Mortgages are another typical type of installment loans. This special home-purchase installment loan allows borrowers to buy a house or other real estate. Mortgages are usually backed by the real estate. A down payment of 5% to 20% of the purchase price is required. If the borrower fails to make payments as agreed, the lender has the right to foreclose on the property.
In addition to mortgages and car loans, unsecured loans and secured loans also belong to installment loans. Unsecured loans are offered without any collateral for security. Unsecured loans usually charge a higher rate of interest. This type of installment loans is only available for people with good credit history and reliable job status. Personal loans and student loans belong to unsecured loans.
Secured loans are offered with the presence of collateral. As opposed to unsecured loans, secured loans feature comparatively lower interest rates. Distinct examples of secured loans are home equity line of credit and mortgage home equity loans. These loans are usually paid over a specific period of time.
Why Choose Installment Loans
Installment loans are a preferable choice for borrowers to purchase large expensive items. There’re certain advantages associated with installment loans that can account for the preference.
- One major benefit of installment loans is the extremely competitive interest rates. The rate often ranges from 5% to 7%. The interest rate is usually fixed for the life of the loan so that borrowers do not need to worry about higher interest rates for greater monthly payment.
- Installment loans require monthly payments of the same amount of money every time in most cases. Borrowers can plan a proper budget and take the right financial move based on the loan term and the amount of monthly payment.
Currently installment loans are one of the most common types of loans for individuals. This type of loan features a fixed term and a fixed monthly payment amount. With installment loans, people can make purchases and pay it back in fixed payments over a set period of time.