Personal loans, mortgage loans and auto loans are all types of installment loans. All of these loans have fixed rates, meaning that a person that takes a loan has to pay the same interest rate every month until the whole loan is paid back.
The mortgage loans make the exception because they have a variable rate. There are non-collateralized installment loans and collateralized installment loans.
The house purchased with a loan becomes the collateral for the mortgage loan while the car bought with a loan becomes the collateral for the auto loan. Some of the installment loans can be extended without a required collateral.
These types of loans are based on the creditworthiness of the person that takes the loan, demonstrated it with the credit score and with the ability of the person to repay the loan shown by his or her assets or income.
The non-collateralized loans have a higher interest rate than the collateralized loans, a fact that shows the non-repayment higher ricks accepted by the creditor.
A person that wants to take out an loan has to fill out an application with a lender like 123 Money Help that offers installment loans. The loan’s purpose has to be specified (buying a house or a car, for example).
The options of different issues like the payment schedule, the payment amounts and the loan’s term are discussed with the lender to the borrower.
If someone wants to get $12000 to buy an automobile, that person will be informed by the lender that a lower interest is possible if a higher down payment is made.
If the person who wants the installment loan takes the loan for a longer period of time, he or she can obtain a lower monthly payment. The creditworthiness of the borrower will be reviewed by the lender before the loan term and amount is established.
The borrower can save the interest charges if he or she pays off the installment loan before the term’s end, established in the agreement. An installment loan is one that has a certain number of scheduled payments.
A credit card also requires a monthly payment, but it is not the same thing with the installment loan. As an example, let’s assume that you want to borrow $2000 for an emergency situation.
You take an installment loan that has to be paid back in one year and at an interest rate of 25%. The installment loan will bring you the needed $2000 and you have to pay the monthly payment for one year long.
Generally, a payday loan is for a short period of time, it is paid back in only one sum payment that is made on the next payday of the borrower.
In comparison, an installment loan can have a longer duration and the payments are spread over the loan’s term. An installment loan can be useful for those with poor credit, with bad credit and for those having no credit background, improving their credit score. A repayment history will be created due to the installment loan’s requirement of many payments over time. There are many options like this for people with poor credit. In any event its important to work on improving your credit. Its hard to live without credit. Check out the video below. Dave Ramsey drives the point home pretty well.
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