Loans that are refunded in several numbers of payments are called Installment Loans. There is a minimum of 2 months to the maximum 30 years given for the repayment of the loan. In such loans, you can borrow the exact amount that you are in need for. Both secured and unsecured loans come under this.
There are several circumstances when you suffer from the financial setback and you can’t borrow money from your family then the only option left is Loan but what type of loan you have to prefer, depends on your exact need and your ability to repay back.
Unlike payday loans, these loans are better if you can’t refund your debt in the single payment instead of need some time and divide payments in monthly EMIs. Here, you’ll get a fixed date of every month to reimburse monthly payment till the installments of the whole debt.
Various type of loans is there in which you need to pay back in partial payment monthly. Some of them are the following:
Installment Loans Online
- Mortgage Loan: In this loan, you need to pay at least 20% down payment for your new house and the rest of the amount can be paid into some fixed amount per month (which can be 3 to 5 times of your annual earnings)
- Auto or Title Loan: This loan is basically to buy a new vehicle and for which you need to get prequalified first (to know if you are eligible to refund your loan or not). So, while signing the application for a loan on the automobile, you need to check terms and conditions. Also, check the monthly fixed amount that you have to pay.
- Student Loan: As the name suggests, this loan is for students who don’t have enough funding for their higher study but good in academics. It depends on the scores of students also that how much loan they can take. Refunding of debt starts when they complete their studies and get a full-time job with a monthly fixed amount.
- Personal Loan: Loans which you can take for your personal use either for your routine life or for any family function etc. This is the loan that is not restricted to a certain use. You’ll have full freedom to use the money on whatever you want. It’s upon you that in how many installments you can repay.
- Id Proof: Which needs your identity proof.
- Citizenship Proof: You must have proof that you are the netizen of that particular state (where you are taking a loan)
- Employment Status: Either you are doing a job under someone or you have your own business. As well as, proper contact details of your employer.
- Salary: It’s the proof of your monthly earning (to convince the lender that you can refund the debt amount)
- Purpose of Loan: Which includes the amount you need and why you want to borrow that particular amount of money.
- Bank account details: History of your bank account (approx. 6 months back) is also necessary along with its details.
- Foreseeable: You can easily manage your budget when you know an estimated amount that you need to pay monthly. So, with a fixed amount of interest and additional charges, you can do it very easily.
- Superior Credit Score: It is also beneficial for your credit ratings as if you pay your monthly installments on time. Further which can be helpful for you in the future.
- Flexible to use: These loans can be used for any purpose; no limitations are there.
- Take an amount that is needed: That means, you can borrow the exact amount for which you are in need. In other words, there is no need to pay an interest of extra money.
Drawbacks of these loans:
- Advance Payment: In some cases, you first need to pay some down payment to get the loan for something.
- Rate of interest bit high: Interest rate in installment loans is quite more as compared to other traditional loans. (in the case of unsecured loan, its more than secured loans). So, try to maintain your credit rating from the start.
What is the process to take an installment loan?
Firstly, you have to get knowledge about the interest that your bank will charge per month. Before applying for the loan, you must compare your requirements with what your lender is offering you for the best deal.
Secondly, check if you are eligible for the loan. If yes then, you need to collect data that is required by lenders for these loans.
Then, you have to wait for the approval from the lender.
What are the main things which need to be reckoned?
- Earnings: It is the main factor on which approval of a loan depends. If you can prove your lender that you are capable of refunding debt by showing earnings per month then you’ll be one step closer to the loan.
- Age group: The more age you have the more chances of approval you’ll get for a big loan with the long term. (due to experience you have)
- Possession: You have to be very careful about that due date of the monthly installment because if in any case, you’ve missed that payment then there must be some extra charges which you’ll need to pay. Hence, it can mismanage your monthly budget.
- Rate of Interest: It varies from loan to loan and the credit rating of yours. If your score is good enough then you don’t need to pay high interest but in another case, you’ll not have any other option.
- EMI: That means equated monthly installments (fixed installment) which is the sum of Rate of interest and principal amount. You can plan your budget according to your EMIs as these are fixed and you’ll get to know prior to taking the loan.
In the end, if you are looking for an installment loan then compare its factors with other loans and take your decision wisely. This will help you with a better decision for sure.