Installment loans are short term loans that are perfect as small business loans, or to cover unexpected medical expenses, or financing a home remodeling project, or basically for any quick cash need. Installment loans are also commonly called personal loans.
Installment loans are safer alternatives to the traditional cash advance. The outstanding feature of this is, instead of paying the entire loan amount along with interest and fees on the stipulated due date, installment loans allows you to customize your payment schedule.
When there is a quick cash need, instead of getting sucked into a vortex of high interest rates and fees or credit card debt, consider the safer option of installment loan where you can make equal, manageable payments over a period of weeks or months, thereby easing the repayment load. Each repayment amount includes a portion of the principal amount and interest.
Before choosing a lender, look out for the policies on loan repayment. Some well known financial institutions do not have any hidden charge or fees attached to their installment loans, and more importantly you pay interest only for the time you keep the loan. They also provide options for paying the loan back early without any penalty.
Major lenders look for the following as eligibility criteria:
- Have an active bank account for a specific period of time (minimum one month)
- Be at least 18 years of age
- Have a monthly income of a specific amount (usually a minimum of 1000$)
- There’s a preconceived notion that installment loans are only for people with bad credit, but that’s not the case. Usually installment loans are unsecured loans, but if the lender is a major financial institution and if the borrower has an account with them, that savings account might be used as a collateral to turn it as a secured loan.
- A common pitfall to avoid as a borrower, is to stay away from renewing the loan every few months , ultimately making you pay more interest and thus dependent on the loan. While looking to apply for a installment loan, ensure that the lender offers competitive APRs and fees, meet with an authorized representative and understand the loan process, especially the repayment terms. Evaluate the lending company on how long it’s been in business and its reputation. Check to see if they have accreditation and good standing with the BBB.
- It might be tempting to go with a no-credit-check lending company, but they might charge you higher APRs and also trap you into a debt cycle. If you are undecided, use the above specifics as a guideline to choose your best fit.