The accumulative personal loan debt in the United States sits at $143 billion, with more than 21.1 million currently outstanding personal loans in effect.
When surveyed, the results found that the most common reason people take out a personal loan is for debt consolidation, with credit card refinancing a close second. However, if you've never taken out a loan, you may wonder what an installment loan is and when you would need one.
We can answer that question, so keep reading to learn more about taking out a personal loan. We even have tips for when you're paying off your fast loan.
What Is an Installment Loan?
An Installment loan is a bank loan that allows you to pay them back in monthly installments of equal value. This loan is typically taken out with a fixed interest rate, which means no matter what the economy is doing, you'll pay back the same amount every payment. Part of this quick loan repayment goes toward the principal amount borrowed, and the rest goes toward the interest.
There are several pros and cons to installment loans. For example:
With an installment loan, you have flexible terms and reduced interest rates. In addition, because you're paying a set amount monthly, it's easier to budget your repayments. However, your interest rate depends on several factors besides the current economic condition. For example, your credit score and payment history are taken into consideration.
Despite all the advantages you can get from a fast loan, there are a few disadvantages. First, if you default on your repayments, this can damage your credit score. Depending on the extent of your default, you could lose any collateral you put down when applying.
When or Why Do You Need an Installment Loan?
When would you need an installment loan? Typical installment loans are mortgage loans, student loans, car financing loans, and personal loans, which can be used for significant expenses like home renovations or wedding expenses.
Another primary reason people take out an installment loan is to consolidate their debt. For example, if you owe more than one institution, you could pay them off with your installment loan.
Tips for Using Installment Loans
Installment loans can be advantageous if you use them responsibly. So, if you've decided you'd like to apply for a personal loan, we've got some tips to help you use it wisely and pay it back faster.
- Round Up Payments: Round up your payments to the next hundred if possible
- Double Your Payments: Double up your payments whenever possible
- Make Extra Payments: Try to add an extra payment when you have the extra cash
- Ask Questions: If anything doesn't make sense, ask before signing on the dotted line
- Check Your Credit Score: Check your credit score to get an idea of how successful your application will be
- Apply Online: You can apply for a title installment loan online
Apply For Your Installment Loan Today
If you decide whether to take out an installment loan, it's wise to weigh the pros vs. cons to determine if it's the right move for you. For example, if your monthly income is only sometimes stable, you risk defaulting on payments. This can negatively affect your credit score and ability to get future loans.
If you've found this article helpful, we've got more like it in our Finance and Loan category. We encourage you to take a look.