An Installment loan is a way for you to borrow money that you pay back with a fixed interest rate over a period that could be months or years.
The typical type of installment loan is a personal loan however there are other type of installment loans such mortgages, auto loans, payday loans including no-credit-check loans.
An installment loan is a common kind of loan that is used to purchase a car; house, or some other big acquisition. You might also have an installment loan that have a different name, like a mortgage. Bellow’s what an installment loan is and what to understand about these loans before getting one.
What is an Installment Loan?
Installment loans allow people to borrow an established amount of money; paid out in a lump sum, that could be paid back gradually. Usually, these loans come with a fixed rate of interest and require regular. Mmonth-to-month payments that are the same every month. A portion of each month-to-month payment is applied to the principal borrowed amount. And a part is applied to the rate of interest on the loan.
Installment loans are different from credit cards or credit lines. Which generally have more flexible settlement terms and variable rates of interest. That means you do not have an expected regular monthly payment. With installment loans, you often know what to expect when your month-to-month bill is due.
Bellow’s what you need to understand regarding what they are. And the way they work if you’re thinking about getting an installment loans.
Installment loans work in a different way than revolving credit. Like credit cards; which offer a line of credit to continually borrow from instead of a sole amount to pay off. Revolving credit lets the money to be borrowed again once it’s repaid. While an installment loan account is finalized at the moment it’s settled.
Types of Installment Loans
There are two primary types of installment loans: secured and unsecured.
An asset or piece of property must be pledged as collateral, or security, for a secured loan. If you default on a loan, the lender has the right to seize the collateral. For example; if you can’t pay back a car loan, the lender could seize your car. In terms of installment loans; personal loans fall under the category of unsecured loans. Which means they often don’t require any form of collateral.