Personal Installment Loans
When we are in urgent need of money for personal matters like unpaid bills, we usually result in taking out a loan. Lenders, such as banks and credit unions, have a variety of loan products that can fit your needs. However, not all these loan products are equal.
Every loan type has a different interest rate, repayment term and schedule. This means that it is prudent to pick one that you are comfortable in regards to the terms. But when it comes to borrowing money for personal reasons, many people have found that personal installment loans are more to their liking.
So what are personal installment loans and what type of benefits do they provide? Keep on reading to find out.
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What are Personal Installment Loans?
A personal installment loan is a loan that you obtain to cover immediate personal expenses and pay it back in fixed monthly payments over a period of time. These fixed monthly payments are known as installments, and you can choose the repayment schedule that works best for you.
For personal installment loans, lenders typically offer rates that range from 6-36% APR. Borrowers can borrow money starting from $1,000 to an upwards of $40,000.
This type of loan is usually an unsecured loan, meaning that you do not need to put down any collateral. But the downside of this is that the interest rates are usually higher compared to secured loans. But, as you know, with secured loans, you can lose your property if you fail to pay it back.
Also, unlike other types of loans, having excellent credit in order to get a personal installment loan is not a must. However, having excellent credit usually means that you will get better rates compared to those with poor credit. While requirements between lenders might vary, you typically need to have a government ID, verified social security number and proof of income.
If you don’t meet the minimum requirements for some lenders, they might still be willing to provide you with a personal installment loan. You just have to agree to make it secured (put down some collateral).
And once the loan is obtained, you can use it for any reason you want. The lender does not dictate how you spend their money. You can buy or pay for anything, whether it is buying a phone or paying medical or wedding bills.
What are the Advantages of Personal Installment Loans
When you obtain a personal loan, you are most likely going to enjoy the following benefits:
- No limits on money usage: The funds from personal installment loans can be used to cover a variety of financial needs. The lender won’t place restrictions on what you can do with the funds. That means it doesn’t matter if you borrowed the funds to pay back a friend or fund a vacation.
- Fast: Some loans take weeks and months to process, meaning you will have to wait for a long time. This type of loan is usually processed within two days after finishing your application – the cash will be in your account after closing. Lenders are able to process these loans fast because the requirements aren’t stringent.
- Terms are long: Personal installment loans can be stretched out for years – some even go as far as 15 years. This makes the loan repayments small and manageable. Such payments are the easiest to pay.
- Fixed interest rates: Throughout the duration of the loan, you will be paying fixed interest rates. This can put you at ease since you do not have to worry about increasing interest rates. The interest rate which you started with is the interest rate which you will finish with.
- Debt consolidation: The beauty of personal installment loans is that you can even use them to settle other loans. Usually, interest rates for these types of loans are low (depending on your credit score). Many people are struggling with high-interest debts, such as student loans or credit card debt, which makes using a personal installment loan to consolidate those debts a wise choice.
- Improve your credit score: A personal installment loan can diversify the type of accounts you hold. In the end, this can impact your credit score positively.
Why Not Get a Payday Loan Instead?
Personal installment loans have their competitors too. But the biggest competitor is the payday loan, which many people think is a viable alternative to a personal installment loan. It is not uncommon to hear people recommend a payday loan when you are in need of some quick funds for personal usage
So what is a payday loan? Basically, a payday loan is a small amount of money that is borrowed at a high interest rate with the agreement that will be paid back once the borrower receives their next paycheck. Amounts for payday loans are usually in the range of $100-$400 and the APR for payday loans can reach as high as 600%.
At the onset, it is clear to see the benefits that a personal installment loan offers over a payday loan. The amounts are too small to do anything with and the interest rates are too high to make it worth it. Furthermore, the loan repayment period is too short and you have repaid it in a lump sum the next time you receive your salary. It does offer the flexible schedule that a personal installment loan offers.
Due to the nature of these loans (they are meant for quick funding), lenders aren’t fussy about credit scores. However, if you fail to pay it back on time, expect the lender to report this failure to credit bureaus. In doing so, this can negatively impact your credit rating.
Personal installment loans are pretty useful since they can be used to cover a variety of urgent and personal needs. On top of that, they are easy to obtain and pay off. While there are other loan types, such as payday loans, knowing what personal installment loans are and the benefits they provide can help you make an informed decision.