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Installment Loans – Everything You Need to Know
You might have a maxed out credit card and need a rapid cash injection, or maybe you want to buy a car and divide your payment over several years. Any loan where you get a lump sum of money and agree to regularly pay it back over a long period of time (with interest). Installment loans differ from payday loans in the way that you make multiple payments instead of a singular payment. There are different types of installment loans, ranging from credit card refinancing loans and personal loans to 40 year mortgages. When correctly used, personal loans can be used to get you out of big debt but they can also help you plunge even deeper into credit dependence.
The most common type of installment loan is a home mortgage. It’s basically a house financing plan over a very long time period (upwards of 30 years). A mortgage is a great example of an installment loan – it can be a great opportunity or it could lead to the seizure of you collateral, depending on how good you’ve planned it out. As a general rule of thumb, your monthly mortgage payment shouldn’t exceed 1/3 of your monthly income. Experts also advise paying as much as possible up-front via down payments, as this can drastically reduce the amount of money you end up owing. Knowing what type of house you want and what your priorities are is critical since you will definitely have to make some compromises. Hiring a professional real-estate agent can get you better deals quicker, and he’ll definitely be able to recommend a home-inspector or a reputable contractor. Limiting your budget is also something that’s important. Banks will tell you what the maximal amount of money you can borrow is, but this doesn’t mean you should. When you have a good grasp of how mortgages work, getting a stable and economical house-loan shouldn’t be much of a problem. Other types of installment loans are very similar to mortgages which makes understanding them all the more important.
Installment Loans are generally divided in to two groups – Secured and unsecured.
A secured loan is a loan where collateral like real-estate or a vehicle is used to guarantee the return of money. This type of loan is usually much less risky for the financiers, and has a much better rate of interest or APR. In the case that the payments stop coming through, the bank can seize the property declared as collateral.
Unsecured personal loans are loans with no collateral. The only thing you’ll basically lose if you default on an unsecured loan is credit score. These credits are a lot more risky for the lender and usually come with a high rate of interest, especially if your credit score isn’t tip-top or if you get one with no credit check.
Sometimes it’s better to get a personal loan than a payday loan, simply because it’s a lot more stable and easy to repay. Contrary to popular belief, installment loans aren’t only for people with bad credit – this is just a product of negative marketing. The people who suffer from installment loan dependence were usually the targets of aggressive lenders. They were forced to frequently renew their loans, increasing their APR sometimes over 200%!
It’s crucial when looking for a good Installment loan to make sure you don’t fall for this trap. Searching for ‘Personal Loans’ instead of ‘Installment loans’ can lead to better results. Don’t get me wrong – Personal loans are Installment loans, but simply because of the bad advertising you’re better off taking your chances with the former. Loan renewals and insurance add-ons are another thing you should keep an eye out for. The majority of add-ons offered are loan insurance policies that just make you pay more and ensure the bank gets their money even if you’re not able to pay them back. Doing your research is important, and make sure you were the one who approached the lender, not the other way around.
Borrowing money for a shorter time period can have it’s advantages. It means you’ll be paying less money over-all but your monthly payments will be higher than those of a long-term alternative. For example – If you borrowed $1,000 with an APR of 10% over a period of 2 years your monthly payment would be around $50, but over a period of 4 years it would decrease to $30 (though you will be paying around 10% more in total). Make sure that the loan isn’t to much for your monthly revenue to handle.
There are ‘Installment Loan Calculators’ all over the internet. You can use these to see how much you’re paying in interest, approximate your monthly payment and experiment with different combinations of contract length and money.
There’s a lot of places you can look for installment loans. Banks, credit unions, online lenders and no-credit-check lenders all offer personal loans, and looking around the best deal can’t hurt anyone. The first place that you should definitely check out is your current bank. They will probably offer you a better deal to keep your business, and may even lighten the credit burden if they see you need help. There are also online services, though often more expensive, they usually match you with several lenders, reducing the chance of you being turned down.
Or you can simply come here to pick up tips and tricks, while simultaneously finding out who has a good reputation and who the internet frowns upon. So, in conclusion, the best thing to do is dig around for good offers. Checking out as many places and looking for transparent, non-aggressive lenders who offer a competitive APR.
Save all the trouble and find the best no credit check installment loan by starting your application now.