The Pros and Cons of Monthly Installment Loans and Why You Need One
Starting a business is tough and finding a way to pay the bills can be even harder. Monthly installment loans can help. Learn about the pros and cons here.
Do you consider yourself to be “financially responsible?”
Some equate being financially responsible to being debt free. But this definition is inadequate and unrealistic. There ARE legitimate reasons to borrow money.
For example, you might need a loan so you can continue your education. Or maybe you need a car right now for your start-up. You can’t pay for one right now with cold hard cash but you’ll be able to do so once your business picks up.
But what’s your financial responsibility when it comes to securing a loan?
For starters, you need to know what you’re getting into. There are different types such as mortgages, car loans, payday loans, and borrowing from loan sharks.
Many of these are monthly installment loans. Rather than paying in one lump sum, as in the case of payday loans, the borrower pays back the lender with scheduled monthly payments.
If you’re considering taking out an installment loan, you’ll want to know the basics. Learn about the pros and cons here.
An Overview of Monthly Installment Loans
Installment loans refer to the majority of personal and commercial loans offered to borrowers. The repayment is scheduled regularly, typically monthly. As a borrower, you pay a portion of the amount borrowed which includes the interest.
The interest of most installment loans is fixed-rate. This means that at the time of borrowing, the interest rate throughout the whole term of the loan doesn’t change. A few types of installment loans, such as mortgages, have variable rates.
The Application Process
How do you apply for an installment loan?
One of the easiest ways is to apply for online installment loans. Internet loans have become increasingly popular in today’s digital age. Of course, you can also borrow from traditional financial institutions such as banks and credit companies.
When you apply for a loan, the lender will always ask what you intend to use the money for. It has to be a valid reason, such as to avoid bankruptcy or to purchase equipment. No one will give you money if you say that you want to build your own personal bat cave.
One of the most common questions asked is how financial companies determine the eligibility of the borrower. The requirements vary from lender to lender but in general, the qualifications are simple and straightforward. These can include your banking information, source and amount of income, and credit history.
The Pros
Let’s talk about why installment loans are the most attractive option for consumers in need of money.
Fast and Easy
Unexpected expenses can surprise you at any time. Crucial factory equipment broke down and needs repairs. Your daughter shows up with her boyfriend and tells you that they intend to get married as soon as possible.
Your best bet to cover these expenses is to apply for an installment loan. You can either do this online or in person. Both methods are quick and easy.
Once you fill up the application forms and provided the necessary documents, you just have to wait for the decision. You don’t have to wait long for the verdict on approval or disapproval. Most loan companies can give you an answer within 24 hours.
You can get the money on the same day that the loan is approved. Loan companies will not put you through the wringer before you can touch the money, as can be the case when borrowing from friends or relatives.
Bad Credit Score? No Problem
If your credit history looks like a report card you’re afraid to show to your parents, do not worry. Even if you have a bad credit score, you can still apply and get approved for an installment loan.
Many companies have loan options that are suitable for all circumstances. Web-based lenders are usually very lenient towards those with bad credit history. However, you still have to prove that you can afford the repayments.
Flexibility
You can always find an installment loan that will fit your exact needs.
Payday loans can only cover a small amount, typically $300 to $400. That’s not enough for the once in a lifetime vacation you’ve been dreaming about. An installment loan can cover whatever amount you need, from a few hundos to thousands.
Another feature of installment loans is flexibility with regards to repayment. You’ll have the opportunity to discuss with your lender the payment options. The details such as the term of the loan, the payment schedule, and payment amounts can be tailored to your income.
If you want to pay off the debt quicker, you have the option of bigger payments on a shorter term. But if your current financial situation doesn’t allow it, you can divide the debt into small, manageable installments over a longer period.
Predictability
As we discussed earlier, most installment loans are fixed-rate. This means that you’ll always know how much you have to pay each month. There are no surprises.
This will allow you to better manage your monthly finances.
The Cons
As with any transaction that involves money, there are some who’ll be looking to take advantage if they can get away with it. The traps and pitfalls set by shady institutions can be considered as disadvantages.
But they’re easy to avoid if you know what to look for.
Some will prey on your low credit score. They’ll offer terms that you typically see with payday loans. The loan agreements will feature high-interest rates and a shorter period of repayment. As we mentioned earlier, you don’t have to take what they’re offering. There are other companies who’ll give you a more favorable deal.
There are others who’ll hide fees and penalties in the fine print. As a general rule, read and scrutinize every detail before signing anything.
The Bottom Line
Monthly installment loans are a quick and easy way to secure funds when you need them. They have simple requirements and offer flexibility in repayment.
Most important of all, they’re available to help you if you’re in a pinch.
Want to know your loan options if you have a bad credit score? Then check out this article.
