by Ismael Frederick | March 22, 2018 9:26 am
Online installment plans or installment loans are a great way to safely borrow money while paying back little bits of money over time. Unfortunately, a lot of people, even those that need cash quickly, shy away from installment loans because they don’t fully understand what they are and the benefits/drawbacks of these borrowing solutions. To help demystify installment loans, we’re going to answer a few fundamental questions, such as, “what are installment loans?” and then take a look at the advantages and disadvantages.
In short, an installment loan is a borrowing solution where the borrower is supposed to pay back the money or loan through monthly payments, also known as installments. There are online financial institutions that will set you up with an installment loan if you need cash quickly. That said, installment loans have some qualifications that must be met.
While they may not be the most popular borrowing solution, installment loans have a lot of benefits that make them an excellent option for certain people, especially those that have bad credit but need fast money now. There are some benefits of installment loans:
Payment Flexibility: When you borrow through an installment loan, you and the lender agree on a monthly payment that is comfortable for you to make, given your current financial situation. You can make fewer payments at a higher rate, or more payments at less money, whichever suits your needs best.
Income-based Payments: In the same light as payment flexibility, you also never have to worry about paying too much at once on these types of loans because your monthly installment amount is based on your income. So, the payments are never beyond your financial means.
Online Borrowing: You can apply and get approval for an installment loan online, which means you can get money on the fly when you need it. Obviously, you have to qualify first, but this added availability is a huge plus.
Bad Credit Is Okay: Most installment loan lenders only care about your employment status and your income – which means you won’t have to spend time rebuilding your credit before you can get approved. This also helps them determine what amount is appropriate for them to lend. Then, their automatic payments to your bank account take care of the rest. Thus, installment loans are an excellent option for people that have bad credit and can’t get approved for other loans.
If installment loans sound too good to be true, then you’re a wise borrower. They do have their faults. Luckily, by educating yourself about these drawbacks, which you’re about to do, you’ll be better at identifying bad lenders and finding the installment loan provider in your area with the most to offer.
Interest Rates: The easiest way to find yourself in a situation where you’re paying too much for your installment loan is by not shopping around to different lenders. Again, installment loans can be secured quickly online; some borrows latch on to the first lender they see because they need that money immediately.
This is an easy way to get yourself locked into high-interest rates and paying a lot more back on the money you borrowed. Thus, you want to be sure that you do your homework and shop around to see the rates of different lenders and find the best one.
Repayment Fees: You have to be careful of lenders that penalize you for paying your installment loan back quickly. These lenders make the most amount of money when you have to borrow money over an extended period; that’s how interest and other fees add up and fill their pockets! If you borrow money through an installment loan, but suddenly come into some extra cash and decide to pay it back quickly, some lenders will penalize you!
Other Fees: Again, a lending institution is ultimately trying to get the most money back on their investment as possible, which means they want to maximize how much you have to pay back on your borrowed money.
An unscrupulous lender will tack on any fees or penalties that they can to make sure that this happens. To protect yourself from a lousy installment loan provider, research their reputation online. You’ll likely find some reviews from other borrowers that will help share some insight into whether a given lender is good or bad.
When you need money quickly, an installment loan is a great option. You can apply and get approved online rapidly, so there’s no need to go to any office or bank. And, your repayment schedule is income-based, which ensures you always can comfortably repay the loan in installments.
That said, you have to be wary of bad lenders that are looking to suck the most money out of you as possible. By understanding the pros and cons of installment loans, you’re better equipped to separate the bad lenders from the good!
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