Installment loans are what most people use to finance some of their biggest milestones, such as purchasing their first home, acquiring their first car, or even funding their first startup.
This is because they allow you to borrow a lump sum and pay it down in equal increments over a set period of time, which makes it the most flexible type of financing. Borrowers can take out online installment loans from USInstallmentLoans that can go up to the hundreds of thousands, with repayment periods extending as high as thirty years.
As such, these types of loans have an advantage over most other lines of credit by offering borrowers a fixed term to pay down their debt. They also come with fixed interest rates that don’t change even if the economy fluctuates.
When combined, this means that borrowers can remain fully aware of how much they will be paying on a monthly basis, as well as how long it will take to repay the loan. Once your loan is approved, you will be unable to withdraw any more cash without applying for a new loan.
This makes them best suited for dealing with large, one-time expenses like debt consolidation. In this regard, there are different types of installment loans to choose from, each with its own rates, terms, and conditions.
What Types of Installment Loans Can I Borrow?
There are three main types of installment loans that most people usually take out: personal loans, home mortgages, and auto loans, so let’s quickly break them down.
#1. Personal Loans
These loans are offered by almost all lending institutions, and they are usually unsecured, which means that no collateral is needed to secure them. Borrowers can typically access funding as high as $100,000 if they have good credit, but they are also accessible to those with bad credit for much smaller amounts.
The terms on these loans typically run between 3 and 36 months with fixed interest rates often determined by a wide variety of factors, such as the borrower’s credit score, their income level, or the amount of other debt they may still be carrying.
According to USInstallmentLoans co-founder Owen Wilcox, “The simplicity and predictability of installment loans are what make them an ideal form of financing for major purchases. This is also why our lending network mostly specializes in providing consumers with access to these types of loans over most other forms of credit.”
#2. Home Mortgages
As the name implies, home mortgages are mostly used to cover the cost of purchasing a home or piece of property. Unlike personal loans, home mortgages are secured, which means that the lender is able to repossess the property if you end up defaulting on the loan.
In this respect, there are three main types of home installment loans, which include FHA loans, conventional mortgages, and VA mortgages. While the first two are available to most consumers, VA mortgages are restricted only to active members of the military and veterans.
Furthermore, each one of these types of loans comes with a fixed monthly payment that extends over an average period of 15, 20, or 30 years. You will also be required to put up a down payment that can vary between 3.5% and 5% of the cost of the house.
Failure to make your repayments on time can result in your house going into foreclosure, which can lead to you losing your house altogether.
#3. Auto Loans
Auto loans are a type of installment loan that is borrowed to help finance the purchase of a new or used vehicle. Auto loans can be accessed from a wide variety of auto dealerships, but you can often negotiate a more favorable deal by shopping around and working directly with a lender.
They also typically come with repayment terms that range between 24 and 84 months. In addition, they don’t necessarily require you to put up a down payment, but it often helps to reduce your monthly payments and can help you get a better interest rate.
They are also similar to home mortgages in that the car can be repossessed by the lender should you fail to pay back the loan.
What Are The Pros and Cons of Installment Loans?
Installment loans tend to be the best way for consumers to make a major purchase when they lack sufficient money to pay it upfront.
After all, they offer borrowers a fixed interest rate and payment schedule that make it easy for them to know exactly how much they will owe and when the loan will be fully paid off.
However, there are also a few downsides to take into consideration before signing on the dotted line. In this regard, there are a few positives and negatives that you should always keep in mind, some of which include;
- Allows borrowers to break major purchases into affordable monthly payments
- Available to borrowers of all credit types
- Offer fixed interest rates and repayment terms
- Provides full transparency on the loan’s start and end dates
- Has high fees such as origination and prepayment fees
- Risk of potential asset repossession and negative marks on your credit report
- Lack of flexibility on withdrawals until the loan is fully repaid.
Is an Installment Loan The Best Choice For You?
If you happen to have a major expense that you need to pay for, then applying for an installment loan via USInstallmentLoans can provide you with a practical means of doing so at an affordable cost.
However, it is always important that you take into consideration what the money is going to be used for and if it is a good choice for your financial future. After all, taking on an installment loan means committing to a long-term debt that needs to be consistently repaid on time.
This means that you need to be confident that you can actually fit it into your monthly budget; otherwise, it could raise your cost of living to an unaffordable level. A good rule of thumb is to ask yourself if what you are taking on is “desirable” or “undesirable” debt.
For instance, borrowing an installment loan to renovate your home or consolidate debt can be classified as desirable debt, while borrowing a loan to pay for shopping or holidays is undesirable debt.
Installment loans are a viable option that is available to borrowers of all credit types, with the only difference being that the lower your credit score is, the higher the interest rate will be.
However, like any other form of debt, it is extremely important that you take into consideration the benefits and drawbacks of applying for one via USInstallmentLoans. If what you are borrowing the money to pay for can increase your net worth, then it makes sense in the long run. Otherwise, don’t risk it.
An alternative option that you can consider is to apply for a credit card with a 0% APR introductory period. This is essentially an interest-free loan that allows you to finance a large purchase without having to deal with a longer repayment period.
However, you will need to ensure that you fully pay off the card’s balance before its introductory period ends; otherwise, you will need to pay interest that can climb as high as 25% or more.