What is an installment loan and how do installment loans work?
What is an installment loan?
An installment loan is a type of loan where you receive a lump sum of money and sign an agreement that you will repay it in regular installments over a set period of time until your debt is paid off. The repayment schedule is predictable, giving borrowers control over their budget and an easy way to plan for a better financial future.
What can direct installment loans be used for?
Direct installment loans can be used for unexpected personal expenses, as well as for a wide variety of things if you don’t have enough money in your savings account. Direct installment loans are repaid with a repayment plan over time. Depending on the type of installment loan and the lender, you may not be limited on how you spend the funds. Direct lenders for installment loans may not ask you how you intend to use the money.
Types of installment loans
There are two types of installment loans: secured and unsecured. Mortgages and auto loans are secured loans, while personal loans and student loans are classified as unsecured.
Mortgages are secured or secured with the home the loan is used to purchase. The same goes for auto loans, where the lender uses the vehicle as collateral against the loan sum. If you fail to make the payments for a secured loan, you risk losing the item used as collateral.
Loans that do not require collateral, called unsecured or unsecured loans, are usually based on the borrower’s credit history and ability to make payments. Unsecured installment loans may have a higher interest rate, reflecting the higher risk of default.
Reasons to Get a Direct Installment Loan
If unexpected expenses come your way – home repairs, auto repairs, emergency legal fees, etc. – and you need emergency funding, a installment loan could help you get back on your feet and give you time to get your finances under control. When you apply for money online and opt for an installment loan, you know exactly how much each payment will cost and how long you will pay off the loan.