What are installment loans?
Installment loans are when you repay a loan over a set period of time with a set number of scheduled payments. This means there are normally at least 2 payments, but the loan term varies depending what you are paying off. Loan terms can be as short as a few months or as long as 30 years. A mortgage is a common type of installment loan. For installment loans, you have to figure out the loan term and the repayment by working with the lender. The amount and term length depend on what you can afford and what you are paying off.
In order to get an installment loan, lenders will look at your credit score, annual income and your debt-to-income ratio. If you have a bad credit score, you can still shop around for installment loans, but you may have a higher interest rate. However, if you make all your payments after receiving an installment loan, you can improve your credit score.
Benefits of Installment Loans
There are several good things about getting an installment loan. The major factors include that you have the option to pay over a longer period of time which can give you significantly lower payments. You also will have the same monthly payment every month because the interest rate will be fixed into you payment. This type of loan also gives you the ability to improve your credit score because you have the opportunity to make consistent timely payments that will improve your credit history.