There was a time when credit card debt dominated consumer debt. These days though, it’s personal loans that are the fastest-growing. Outstanding loan balances total $120 billion.
If you’re considering a personal installment loan, there are a few things you need to know. We’ve created this guide to help you go into your installment loan with the knowledge you need to borrow responsibly.
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What Is an Installment Loan?
A lender will approve you to borrow a specified amount of money. There will be repayment terms for your loan that outline how you will repay the money that you borrow. This will include your interest rate, payment timing, and payment amount.
There will also be penalties if you fall behind on your payments. On the other end of the spectrum, the lender may permit you to make early payments.
Source: Installment Loans Work
How to Qualify
The better your credit score, the better the terms of your loan will be. A FICO score of over 700 is considered good and will get favorable terms. If your score is over 800, then you have an excellent score.
If your score is below 700, then you risk having high-interest rates and possible rejection from some of the pickier lenders.
Lenders will look at other factors, such as your ability to repay your loan. To do this, they will look at your current income to debt ratio.
Some lenders will also require you to provide collateral. This is personal property or cash that you set aside. If you default on your loan, then the lender has a right to the collateral to recoup their losses.
What If You Have Bad or No Credit?
You can still qualify for an installment loan if you have bad or no credit. Sites like Bonsai Finance can help you identify lenders that specialize in these types of loans.
You can use the loan to improve your credit score by making monthly on-time payments in the full amount you owe. The lender will then report your payments to the credit bureaus.
Source: moneyforlunch
What Can You Use Your Loan For?
There are personal installment loans available for a wide range of purposes. The four most common are auto, mortgage, student, and personal. Here are some of the many other possible uses you can use your loan for.
- Home repairs and remodeling
- New or used car purchase
- Education
- Vacation
- Debt consolidation
Where to Get an Installment Loan
You have a few options when it comes to finding your installment loan. The traditional route is to go to your local bank. Going to the bank or credit union that you already use may get you more favorable rates.
You could also look online. This lets you compare rates from the comfort of your couch. The online lender will do a soft pull on your credit to determine your eligibility and estimate your loan terms.
Source: hrpayrollsystems.netApply for a Personal Installment Loan
Now that you know everything you need to about a personal installment loan, you’re ready to apply for your own. So give your credit a check and get your financial information in order.
Then apply for your loan and budget for your new monthly payment.
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