If you’ve been researching different forms of finance, you’ve probably come across a range of different lending products and lenders. It can be hard to sort through all the terminology and come to an honest conclusion about what loan is right for you. This can result in you agreeing to a financial contract that you don’t fully understand. For this reason, it’s important that you make sure to do as much research as possible.
A personal installment loan is a form of finance that has become very popular with borrowers around the country. But many people don’t understand what they are. Installment loans are simply a very basic lending product that is paid back over a fixed period of time. You borrow a lump sum of money from a lender, and pay it back with interest over a fixed period determined by the lender. It is a very straightforward way to borrow money.
This guide has been designed to be a comprehensive guide to personal installment loans. If you’ve ever wondered about this form of finance, this guide will provide you with all the information you need. We’ve been able to compile the data that every prospective borrower is looking for. Make sure to read the rest of this guide if you’re looking for answers to questions you have about personal installment loans.
Personal Installment Loans Vs. Term Loans
Personal installment loans and term loans are effectively the same thing. They are simply different terms for the exact same lending product. They are both standard loans that require you to borrow money from a lender and pay it back over a fixed period of time. You will be given a lump sum of cash, with an interest rate and period of time in which you need to pay back the loan. It will then be up to you to meet these financial obligations.
Remember, don’t get confused between these two forms of finance – they’re exactly the same thing.
Personal Installment Loans Vs. Credit Cards
People often compare personal installment loans to credit cards. This is because they are both forms of credit that are offered to regular consumers. Credit cards are different because they are a form of revolving credit. This means that you can use the money extended to you through a credit card once you pay it back. As long as you are able to meet your minimum payments, you will never have to fully pay off your credit card.
On the other hand, a personal installment loan requires you to pay back all the money that you have borrowed over a fixed term. This means that there is a pre-determined amount of time that you have to pay back the loan to the lender. There is no flexibility in terms of borrowing. If you want more money, you will have to apply for a brand-new loan. On top of this, credit cards also come at a much higher interest rate. Lenders know that you’re willing to pay a premium to have access to ongoing finance.
Who Prefers a Personal Installment Loan?
So, who prefers a personal installment loan in comparison to other forms of finance? As mentioned previously, credit cards are an extremely popular borrowing mechanism. But many people prefer personal installment loans for a variety of reasons. Credit cards can make it easy to fall into a high-interest debt. They carry higher interest rates and they allow you to continue borrowing without having to apply for new finance.
For this reason, many people who find it hard to pay off debt will find it better to have a personal installment loan. It makes it much easier to pay off the debt that you owe. In addition, interest rates are lower, which means that you won’t end up accumulating as much debt during your lending process.
Secured Vs. Unsecured Personal Installment Loans
There are actually two forms of personal installment loans. While they are similar in nature, the small differences actually dictate a large disparity between these two different types of loan. We will explore each of these forms in more detail below:
Secured Personal Installment Loans
This form of installment loan is secured against an asset that you own. It requires you to guarantee the loan with your home, car, or other valuable item. If you can’t pay back the loan, then the lender can seize the asset that you’ve secure it with to get back their money. They will liquidate your asset and take the money that is needed to satisfy your debt.
For this reason, this form of loan is considered much riskier for borrowers. You could end up having your home taken away if you’re unable to pay your debts. While these loans typically have much lower interest rates, they should only be used by borrowers who know they can pay back their debts on time.
Unsecured Personal Loans
Unsecured loans on the other hand do not require you to use an asset to guarantee the loan. If you end up defaulting on the loan, the only thing that will be impacted will be your credit score. On the other hand, these loans also come with much higher interest rates. This is because the lender is risking much more to lend you the money. They’re also much harder to get – if you want to get an unsecured personal installment loan, you may have to have a decent credit score to be eligible.
Other Forms of Installment Loan
If you are considering an installment loan, but you still don’t fully understand what they are, it can often be helpful to view other forms of installment loans to get a better understanding of the features included in this form of finance. Below we will outline other forms of installment loans available to consumers. There’s a high chance you’ve had one of these loans in the past.
This is one of the most common forms of installment loan on the market. Tens of millions of Americans have mortgages to help them purchase their homes. This also happens to be one of the longest forms of installment loan available – many mortgages are 30 to 45 years long. Which is extremely long when you compare it to other forms of finance.
This form of loan is also secured against the value of the home, which means that the lender can seize the property if you don’t make the right payments on it. You will also find that most interest rates for mortgages are variable – lenders know that interest rates will change drastically throughout the course of the loan as it is such a long term.
This is another of the most common forms of installment loan. These types of loans are also used by tens of millions of Americans to pay for their vehicles. Interest rates tend to be extremely low, as this form of loan is secured to the value of the car. Terms are also quite short – most auto loans have terms between three and five years.
Who Provides Personal Installment Loans?
There are a variety of different lenders that provide personal installment loans to their customers. The lender you choose will depend on the type of borrower that you are. We will explore the primary two types of lenders that currently provide personal installment loans in the United States. Pay attention to their key features and benefits so that you can make an educated decision on which lender is best for you!
Traditional lenders are typically brick-and-mortar banks. You probably have a bank account with a traditional lender. They’re the biggest part of the consumer lending industry in the United States. These types of lenders provide personal installment loans to millions of American throughout the country. They’re one of the best options for someone who is looking to work with a company that can provide a large amount of capital. They’re also great to work with if someone is looking for the strength and reputation of a large bank.
Online lenders also provide personal installment loans. Their lending process is much quicker and doesn’t require you to head to a branch to fill in a lengthy application. These lenders are also able to provide you with much quicker decisions – you can have money in your account within 24 hours of applying for finance.
Advantages of Personal Installment Loan
It can often be hard to decide if a type of finance is right for you. There is typically a lot of information to take in during the decision-making process. That’s why we’ve created a section exclusively dedicated to providing you with all the advantages of obtaining a personal installment loan. Check it out below:
- Low Interest – Personal installment loans tend to have lower interest rates than a lot of other forms of finance. For this reason, they are considered good options for people looking to try and save some money. If you want to avoid the high interest associated with many credit cards, a personal installment loan is typically a good option to work with.
- Structure – Personal installment loans also provide you with structure in terms of paying back the money that you owe. With credit cards, you can continue to borrow money once you have paid it back, which makes it harder to escape a debt trap if you have bad spending habits. With personal installment loans, you have a set timeframe in which you will pay back the loan – it’s better for those who need to plan.
- Customizable – You can decide if you want to tie your loan to an asset that you own, or if you want to pay higher interest to have your loan unsecured.
- Range of Lenders – There are a range of different lenders that you can choose from, which makes it easy for those who are looking to be able to choose from a variety of different finance companies.
- Improves Your Credit Score – If you’re a responsible borrower, having an installment loan will improve your credit score. You’ll find that if you pay back your loan on time without any hiccups, lenders will look much more favorably upon you in the future.
- Quick – This will depend on the lender that you choose, but many term lenders are able to get you the money that you want within a short period of time. In fact, many lenders can get the capital you need into your bank account in less than 24 hours. This is extremely quick in comparison to other financial products on the market.
Disadvantages of Personal Installment Loan
Just as there are many advantages to getting an installment loan, there also plenty of drawbacks. It’s important to consider these negative traits when you’re trying to decide if getting a personal installment loan is right for you. We’ve included some of the prevalent disadvantages below:
- Minimal Flexibility – You need to make sure that you know exactly how much money that you need to borrow. If you don’t, you won’t be able to extend your loan the way that you would with a credit card. You’ll have to apply for a whole new loan every time that you need financing.
- Complications – While some term loans are easy to obtain, others may take time. Credit cards on the other hand can be extremely easy with certain lenders. You may find that term loans can be painful if you choose the wrong lender.
Personal installment loans provide you with great access to cheap financing. They also provide borrowers with a set structure to pay back their debt. This is great for those who want to have a payment plan to help them pay their debt in a timely fashion.
The major downside to personal installment loans is having to choose which lender to work with. That’s why we’ve created a list of the best lenders in the industry. If you’re looking to work with a reputable lender that has a longstanding reputation in the industry, make sure to head to our homepage and check out our top picks. We love giving our readers the best opportunity to work with someone who is able to provide them with everything they’re looking for.
If you still have any questions about personal installment loans, check out our other content for more information!
General Information on Installment Loans
In this section, you’ll find everything you need to feel confident about knowing about installment loans.
What is an installment loan?
An installment loan is a type of loan with predetermined payment schedules and amounts over a period of time. It can last as short as a few months or as long as 30 years.
How do installment loans work?
The lender will first calculate the total amount of your loan after interest. Then, it will be divided into even payments which will you have to pay at certain dates.
What is a secured installment loan?
A secured installment loan is a type of installment loan where you would need to have a collateral which is usually what you need the money for in the first place.
Do installment loans check credit?
Some lenders don’t check credit such as for peer to peer loans. However, they would check credit for bigger loans.
What are installment loans used for?
For a lot of things. It can be to purchase a home, to buy a car, or to simply use for whatever purpose you have.
What is an unsecured installment loan?
Unlike the secured installment loan, an unsecured installment loan does not require you to put up a collateral.
Where can I get an installment loan?
What kind of installment loan are you looking for? For small loans, you can go to alternative lenders. For bigger loans, you have to go to traditional banks or to credit unions.
Where can I get an installment loan online?
In a lot of sites. There are a number offering this service already such as Northcash and Lending Club.
What is a consumer installment loan?
It’s any installment loan that you borrow from a lender whether secured or unsecured. For as long as an individual instead of a company or organization is applying for a loan, it’s considered a consumer loan.
How do I get approved for an installment loan?
Make sure to meet all the requirements and submit all the documentation required by the lender. Put simply, make yourself look as responsible a borrower as possible.
What do you need for an installment loan?
Different lenders would require different things, so you have to refer to your chosen lender for this information.
What is an open installment loan?
An open installment loan is an installment loan that’s more lenient with the terms. Depending on your lender, you may be able to increase your loan amount from time to time.
What is considered an installment loan?
Some loans falling under installment loans are mortgage, HEL, and auto loans.
Are installment loans bad?
Not at all. In fact, it helps you better manage your budget because you already know what you’ll pay each month.
Is a credit card an installment loan?
No because a credit card has a revolving credit, and the amount you pay can change every month.
What is a personal unsecured installment loan?
It is a type of personal loan that has a fixed interest rate and payment period and that does not need collateral for you to get.
What is a signature installment loan?
It’s a type of installment loan that is short-termed and is quick and easy to get approved for.
What is a characteristic of an installment loan?
Its main characteristic is fixed interest rate and clear payment schedules where you pay part of the principal and of the interest.
What are some types of installment loans?
Aside from those already mentioned, a student loan can also be classified as an installment loan.
What is debt installment loan?
There’s no such term. Simply, it’s an installment loan.
Calculating the Installment Payments on your Loan
Know more about how your payments are determined in this section.
How do I calculate monthly installment for personal loan?
Multiply the amount you borrowed by the annual interest rate. Then, divide that number by the total number of payments for the life of the loan.
How do I determine the monthly payment for an installment loan?
You don’t have to. After you get approved for a certain amount, you would be informed of how much your monthly payments would be.
How do I calculate loan installment in Excel?
Use the PMT (rate, periods, -amount loaned) function. Just remember to divide the annual rate by how many times the interest compounds in a year.
How do I value installment loans?
There are so many ways and interpretations on how you can value your loan. You check out online calculators to find what exactly you’re looking for.
How do I calculate finance charge on installment loan?
With installment loans, just multiply your monthly payment by the total number of payments there are for the entire life of a loan. Then, subtract the resulting number to the amount you loaned.
Difficulties with Paying your Installment Loan
In the unfortunate situation that you’re finding it hard to pay off your loan, what happens? Here, we present these different scenarios.
What happens if I default on an installment loan?
You risk losing collateral (if any) when you default on the loan. Expect your credit score to take a dip as well.
What happens if you don’t pay an installment loan?
If still within the statute of limitations, the lender may choose to sue you in civil courts to potentially liquidate some of your assets. They may also sell your account to debt collectors that are notorious for harassing people.
Can you refinance an installment loan?
Definitely. However, lenders may require you to put down a certain amount on the principal to approve your request.
How do I get rid of installment loans?
By paying them. If there’s no real need to borrow money, you should not borrow at all.
How to get out of installment loan debt?
You can talk to your lender about refinancing or you can consolidate debts to better manage payments.
How do I pay off installment loans?
Recognize that there may be some discomfort on your part such as not eating out or not buying that new phone. Every dollar you save by living a simpler lifestyle can go into paying off your loan.
Can you consolidate installment loans?
Yes. Installment loan consolidation is the same as any other consolidated debt, both of which allows a third-party negotiator to talk to your lender to lower interest rates or balances.
Can I pay off an installment loan early?
Yes. However, there’s not much incentive with that as your payments are already fixed at a certain amount.
Installment Loans and your Credit Report
In this section, discover the interrelatedness of your credit rating and installment loans.
Can you get an installment loan with bad credit?
Definitely. Thanks to online lenders, it’s easier for people now to acquire loans, including installment loans, without going to loan sharks.
How to get an installment loan with poor credit?
The one and only way to at least have a chance when applying for an installment loan is to check the lender’s minimum requirements. If you qualify, apply for it.
What is an installment loan on my credit report?
It is recorded as the type of installment loan it is (mortgage, auto loan, student loan, etc.). During the life of the loan, it affects your credit the same way as other loans.
Do installment loans build credit?
It can, especially with longer-termed loans because over time, they increase the average age of your accounts.
Are installment loans good for your credit?
Whether any loan is good or bad for your credit depends on you. Remember that maintaining a good payment history takes a huge chunk in computing your credit score.
How do installment loans affect credit score?
Aside from the payment history, installment loans also affect your average age of accounts and loan diversity. So, it is possible for your score to drop a little after they’re paid off.
Installment Loan Providers
From your most frequent queries, three lending companies piqued your interest. Here are some things you may want to know about them:
How does Ace Cash Express installment loans work?
When applying, you only need to bring 1 government ID. After that, wait for approval. Ace Cash Express boasts a longer payment term that a payday loan, so it’s good for emergencies and if you don’t have a lot of money for repayment.
Does Advance America do installment loans?
Yes. However, check first if their services are available in your state before applying.
How does Check ‘N Go installment loan work?
After submitting your application, they’d get back to you with the loan agreement and the loan amount. Unless you contest the terms, the amount would be transferred to your bank account.
Anything that have not been addressed yet are in this section. This includes clarifications on what installment loan really is as well as how many installment loans you can have.
Is a personal loan an installment loan?
Yes and no. There are two basic types of personal loans: term loans and lines of credit. The latter is not considered an installment loan.
How is a single payment similar to an installment loan?
Aside from they’re both loans, they are completely opposite.
How many installment loans should I have?
It depends on your needs. Sometimes, emergencies happen, requiring you to take one loan after the other.
How many installment loans is too many?
Once you’re having trouble keeping up with the payments, that’s already too many. By this time, you might want to consider refinancing or consolidating your installment loans.
Christine has a solid background in personal finance as she spent the last eight years working at one of the biggest banks in the US. She managed her own team of financial advisors that helped hundreds of people with their financing needs. Her innate understanding of different financial products and loans helped her move up the ranks quickly after graduating with a degree in Business Administration.