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03.16.2020 / Borrowing « Back to all articles
4 Important Facts to Know About Installment Loans
Characteristics of an Installment Loan
An installment loan is any amount of money that is lent to a borrower all at once, and then paid back in installments. The average mortgage, car payment and student loan repayment plans follow this model.
Typically, an installment loan will have a fixed term, meaning there is a date when the borrower agrees to have the whole amount paid off. The interest rate is usually (but not always) fixed with the amount owed split up into a number of monthly payments that come regularly until the loan is paid off.
How an Installment Loan Differs from Other Loans
An installment loan is different from what is called a revolving line of credit. A credit card is the most common example of a revolving line of credit. A credit card does not need to be paid off all at once or at a certain date, as long as the minimum payments are made. A revolving credit line does not provide cash up front like a loan. Rather, the borrower can use credit for purchases and agrees to pay any debts incurred.
Installment loans are also different from payday loans in that they do not need to be paid back all at once. They tend to have a lower interest rate, as they are intended to be paid back over a longer period of time, usually years instead of days.
The Pros of an Installment Loan
Typically, taking out a personal loan is viewed as an installment loan. Any other lines of credit that have become unmanageable can be consolidated by taking out an installment loan to pay off other debts. This is because installment loans are, more than anything else, stable. The monthly payments (installments) are regular and do not fluctuate. These regular payments are usually negotiated in such a way that the borrower can manage it. This takes pressure off the borrower and also prevents them from running up debt easily, as with a credit card.
Credit Talk
03.16.2020 / Borrowing « Back to all articles
4 Important Facts to Know About Installment Loans
Characteristics of an Installment Loan
An installment loan is any amount of money that is lent to a borrower all at once, and then paid back in installments. The average mortgage, car payment and student loan repayment plans follow this model.
Typically, an installment loan will have a fixed term, meaning there is a date when the borrower agrees to have the whole amount paid off. The interest rate is usually (but not always) fixed with the amount owed split up into a number of monthly payments that come regularly until the loan is paid off.
How an Installment Loan Differs from Other Loans
An installment loan is different from what is called a revolving line of credit. A credit card is the most common example of a revolving line of credit. A credit card does not need to be paid off all at once or at a certain date, as long as the minimum payments are made. A revolving credit line does not provide cash up front like a loan. Rather, the borrower can use credit for purchases and agrees to pay any debts incurred.
Installment loans are also different from payday loans in that they do not need to be paid back all at once. They tend to have a lower interest rate, as they are intended to be paid back over a longer period of time, usually years instead of days.
The Pros of an Installment Loan
Typically, taking out a personal loan is viewed as an installment loan. Any other lines of credit that have become unmanageable can be consolidated by taking out an installment loan to pay off other debts. This is because installment loans are, more than anything else, stable. The monthly payments (installments) are regular and do not fluctuate. These regular payments are usually negotiated in such a way that the borrower can manage it. This takes pressure off the borrower and also prevents them from running up debt easily, as with a credit card.
