Know If An Installment Loan Is Your Best Option
It is wise to make sure you know about the available types of loans before we compare installment loans with revolving loans
. There are unsecured loans, secured loans, installment loans, revolving loans, adjustable rate loans, and fixed rate loans.
To simplify things they will be explained here. Unsecured loans, are the loans that generated without any documents or identifications and are granted based on the borrower's credit standings.
On the other hand and in order to get secured loans you have to offer some kind of collateral against the borrowed sum.
In most cases the lender will finance for your offered asset (collateral). You can also ask for more money against the asset from the lender. In this type you get low interest rate compared to the unsecured one.
With fixed rate loans the charging of interest rate is fixed. The only disadvantage in this type of loans that if the interest rates fall, then you lose in terms of costs. But with the adjustable rate loan, the charging of the interest rate will change according to market (floating).
Revolving loans allow you to take the amount up to the maximum limit. If the credit limit is $20,000, then you can take up to $20,000.
And you can repay this amount as total or part of the amount. After paying the revolving loan, if you want another loan, then there is no need to open new account you can simply draw the amount.
The most common example of revolving loan account are credit cards and home equity lines.
Usually, revolving loans are used to improve credit scores, because its monthly payment is very less than the other loans.
With installment loans you will get bulk amount of money and you have to pay the installments through periodic payments. If you need money in future you have to open a new installment loan account, which is either unsecured or secured. The most common installment loans are mortgages, personal loans and student loans.
Installment accounts are very competitive in interest rates than the revolving accounts. You can also build up your credit score by using installment accounts. If you are trying to take a home loan or an auto then it is a great choice to establish your credit.
The main benefit to the installment loan is that the loan is available for repayment over a longer period of time rather than on your next payday as with a payday loan. These loans help to ease the stress of some bills that are typically not thought about as they allow the individual to pay back the loan in installment payments and over a period of time.
Another great benefit is that there is no credit check so even those who have bad credit typically quality for this type of loan which can be a great help to them.
What might you use installment loans for? Installment loans are typically thought of as loans that are available to help you deal with an emergency situation.
These loans are typically loans that are available to the borrower on terms in which they are able to pay them back slowly and therefore they can help with a lot of immediate an unexpected bills like hospitals, medical emergencies and car problems or towing. These bills are ones that are not expected that many people who live paycheck to paycheck would have a hard time paying.
Since they are available to most anyone they are a great way of paying off emergency and unexpected bills in a quick and timely manner without having to deal with billing departments and other financial hassles.
Overall installment loans can be used for a number of different reasons. There are many different types of individuals who use installment loans as well.
These loans are the type of loan that has been utilized as being able to help the borrower through a tough time or problem. Many times the borrower will actually be able to pay these loans back more quickly than scheduled and are a loan repayment option that is available for the majority of those who are involved.
by: Jack Landry
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