An installment loan refers to a loan wherein a set of number of scheduled payments are made over time. For instance, Jane needs to borrow $1,000 to pay for an emergency medical expense. Jane takes out an installment loan, needing paying the amount back within 24 months period at a 25% interest rate. In an installment loan, Jane can get a check worth $1,000 and pay regular monthly payment of $53.37 for a period of 24 months. What is the difference between a payday loan and an installment loan? Payday loans have higher interest rates, paid as a single lump sum on the next payday of the borrower, and are consider short-term loans. In contrast, an installment loan usually last for many months and there is an even spread out of payments over the term of the loan.
Installment loans are usually used to help to build credit for those who have a poor credit, bad credit, or no credit history. Since installment loans involve multiple payments, they help in creating a history of repayment. Installment loans can help in improving an individual’s credit score most especially if the borrower makes timely payments. Having a bad credit can really ruin your finance reputation most especially if you make business transactions, so dealing with an installment loan can help build and establish a good reputation. If you need extra funds that cash advance can not provide, your best option is an installment loan. Borrowers are given more flexibility to decide how much they can borrow and the duration of time they can pay it back. A borrower can decide on a long-term loan with smaller payments or vice versa. Not all states have installment loans, and there are some states that dictate the minimum and maximum loan amounts that a borrower can borrow from an installment loan.
There are interest charges and associated fees involved in the cost of an installment loan, that needs to be explained in the lender’s loan agreement, and notifications should be sent to the borrower if late fees apply if ever the borrower is unable to make payments on time. It is important to be aware the lenders must express all charges and fees in dollar amount including the annual percentage rate (APR). Allow Bonsai Finance to help you get an installment loan so you can create a good payment history, most especially if you are dealing with a bad credit or poor credit standing. Instalment loans can be your best option in times you need to establish a good payment history, and we can be your partner!