An installment loan can be used for different purposes. The loans can come in handy if you want to pay for your college education, do home renovations, buy a car or any other reason. An installment loan is offered in lump sum amount which is required to be paid in equal monthly installments. So whether you have already applied for the loan in the past or you are yet to decide whether taking out, the loan is a prudent decision, there are quite a number of things that you ought to know. Here are some of the things you need to know before applying for an installment loan;
1. Large loan amounts
Unlike cash advances, these loans are offered in large amounts. You can qualify for installment loan up to $1,000 or more depending on your credit score among other factors.
2. The loans have low monthly payments
One advantage of an installment loan is that you won’t have to worry about repaying the loan in a lump sum, unlike payday loans whether the leader requires the full amount including the interest after a specified period of time.
3. Manageable payments
Payments for installment loans are also manageable since you only need to pay a portion of the loan every month until the whole amount is cleared. You can therefore be comfortable paying off the loan while attending to your monthly needs.
4. No restrictions on usage
A person can use an installment loan for different purposes. You can use the loan to pay for medical bills, start a business, do car repairs or even go for a vacation (although the loans are not recommended for this use)
5. High interest
When it comes to the lending world, lenders are different and they also have varied terms. Some lenders tend to increase your loan term to benefit from more interests. You should therefore be careful on the lender you choose to work with and the loan term.
6. Prepayment penalties
If you pay off the loan before the due date, you may incur prepayment penalty. It is therefore important to find a lender who does not impose these charges since paying the loan fast will also reduce your interest rate.
In most cases, installment loan lenders require borrowers to have collateral for the funds to be approved. The collateral can be your car, house, savings account or even jewelry.
8. Longer loan terms
One benefit of the loan term being loan is that you can manage paying the debt. But the future is also unpredictable and you never know when you will lose a job or make is lost in business. Such circumstances can hinder you from making payments on time.
An installment loan can come with several benefits. But even before taking out the loan, you should also consider other options available. If you want to finance your studies, for instance, you can also consider if you qualify for scholarship awards or grants to avoid getting into debt. If taking out, the loan is the best option for you, it is also important that you compare different lenders and only work with one who offers loan rates and flexible loan terms.