You might have heard of installment payments, but have you heard of an installment loan? The two work the same way, in which you borrow a certain amount of money, and you repay it over a fixed number of payments. Most have fixed payment amounts, which means the amount doesn’t change throughout the loan.
What sets an installment loan apart from a credit card or line of credit loans is that it lets you borrow a certain amount of money. The loan will be paid on specific terms, which is usually done monthly. With this, the repayments you make are called “installments,” hence, it’s called an installment loan.
There are different types of installment loans; in fact, you may already have them without realizing it’s an installment loan. Some of them are:
Auto loans are a type of installment loan because you repay it over a certain period—or on an installment basis. The loan repayment period is between 12 and 96 months. Usually, if you want lower monthly payments, the best way to achieve this is to stretch the loan repayment to its maximum period. However, you could have higher interest rates for this, which means you could pay more for the car.
Your house loan is a type of installment loan that comes with longer repayment terms—between 15 and 30 years. You will find mortgages today that come with fixed interest rates, which means that you will pay for the same amount and interest rate over the life of the loan.
Personal loans come with repayment terms from 12 to 96 months. Personal loans are that, even if you can use them for various purposes, they come with higher interest rates than other kinds of loans. Why? Personal loans don’t come with collateral, which explains its stricter terms and requirements.
Why Get an Installment Loan
One of the best things about an installment loan is the predictability. You can look forward to fixed payments every month that will let you plan your finances accordingly. This makes it ideal for those who need to be strictly on budget. Moreover, an installment loan, due to its predictability, can help you avoid missed payments.
Indeed, an installment loan’s main benefit is that predictability brings forth a host of other advantages. With it, you don’t need to worry about any unexpected changes.
Why You Shouldn’t Get an Installment Loan
Sure, installment loans are predictable, which is a good thing for many. However, it comes with its downsides as well.
A downside of an installment loan is you can no longer add to the amount you borrowed when you take the loan out. If you need more money, you need to take out a new loan, which means you need to go through the process again. Furthermore, there’s no assurance that you will get approved, especially if you still have an existing loan.
That’s why it’s essential you determine the exact amount you need to borrow before you apply for an installment loan.
Overall, an installment loan is a good type of loan. You only need to understand the conditions and terms before you agree to it. Moreover, you need to assess your financial capabilities first and evaluate if it’s something you can do.
Let us help you with an installment loan here at Calhoun Finance Company. We offer same-day installment loans. Apply today!