Have you ever applied for a car loan or mortgage loan? Both of these loans are the types of Installment Loans. If you are applying for a loan and lender offers you all the money at the same time, and asks you to pay back the amount in the over the time following the schedule, you are applying for an Installment Loan!
What is an Installment Loan?
An installment loan is different from the Lines of Credit and Merchant Cash Advance, lines of credit offer revolving credit – your account recharges once you have paid the debt with interest. On the other hand, Merchant Cash Advance offers you the funds and, then the lender takes money from your daily credit card sales. Installment loans are not designed in this fashion; the borrower pays back the loan amount in the form of monthly payments. Each monthly payment is known as an ‘Installment.’ And each payment consists of principal and interest rate.
Basically, an installment loan is the best funding option for your small business when you need cash in a snap of the finger. The application is like counting one to ten – easy and not time-consuming. With these funds, you can easily turn around your small business. You can use these loans to surprise your staff with a new chair or spend the funds on the training sessions of your employees. It all depends on your needs!
How does an Installment Loan work?
Applying for an Installment loan is not a hard task! All a borrower has to do is to fill an online application. Then, the lender evaluates the borrower’s application based on the creditworthiness. The eligibility criteria depend on the type of the installment loan you are applying for. All of the options come with a different interest rate and a number of installments. So all you have to do is:
- See if you can qualify for installments, make sure you have all the documents mentioning the total time you have spent running this business, credit score report and other financial documents.
- If you think you have all that it takes to qualify, apply online, and free of cost by filling an application by entering all the essential details. Or you can visit your potential funding company in person, get all the details, and funding options from a financial advisor.
Compared to other loans, installment loans work in a finer and simpler manner which makes it easier for the borrower to apply for one. It is wise to study multiple types of installment loans before applying for one.
Types of Installment Loans
Primarily, all of the loans are divided into two categories – Installment Loans and Revolving Lines of Credit. Following are the types of Installment loans:
- Auto Loans
Looking for a car to take business trips? Numerous bank and credit unions offer auto loans, but before you apply for an installment loan research two to three car options from different stores, so you are able to select the best one! |You can pay back the money in the span of 12 to 96 months.
Mortgage loans are a type of loan, where banks or alternative lenders offer cash to the borrower and the real estate or the property act as collateral. The borrower is supposed to make the payment within the given schedule. Mortgages have fixed interest rate remaining any element of surprise.
Moreover, installment loans are subdivided into two categories. The first one is a collateralized loan, auto loans, and mortgage loans fall under this category. In case of violation of any payment, the lender has the authority to seize the assets. On the contrary, applying for an uncollateralized loan does not require any collateral. Since the lender has to control over your asset, the interest rate is slightly higher as the lender has to save itself.
Factors to consider before applying for an Installment Loan
Lenders focus on two factors while evaluating an installment loan application – credit score and income.
The lender pays significant importance to credit score because they want to make sure that you will be able to pay back the loan on time. Multiple lenders offer bad credit installment loans as well. Funding is available for every credit score, but usually, it comes with a higher interest rate. You can improve your credit score by setting up multiple reminders so you never miss out on any pending payment. Try to be active on all of your bank accounts. Other than credit score, lenders pay special attention to your income.
Whenever you are applying for a loan, any type of loan, you must ask yourself one question: Will I be able to make the repayments on time? An installment loan will consume around 20% to 25% of your monthly income and single mortgage payment will consume 30% of your monthly income.
Analyze your current financial situation and, if your business is generating enough revenue to cover all the payments, only and only then, apply for an installment loan.
Apart from having a decent credit score and consistent cash flow, you must be fulfilling the following requirements as well.
– Living in the same state as the location of the bank or the credit union you applied.
– The borrower must be 18 years old.
– Passport or driving license for identification.
With these things in place, you are all set to apply for an Installment loan.
Advantages of an Installment Loan
Unfluctuating Interest Rate
An installment loan comes with a stable interest rate, unlike other alternative loans. With stable rates, you don’t have to worry about the hike in the total payment.
As a borrower, you have to choose between long term and short term payments. If you have inconsistent income, long payment terms would be a better option for you as the monthly payment amount would be lower as compared to the loan amount of the short-term payment. But if you need to get over with the loan payment as soon as possible then, go with the latter.
If you apply for an installment loan, you can get a decision instantly – whether your application is approved or rejected. Unlike other traditional loans, you don’t have to wait for a couple of months and watch all the investment opportunity slip away!
Disadvantages of an Installment Loan
In order to save the credit score, borrowers must stick to the repayment schedule.
Before you sign the dotted line, make sure you ask your lender about the penalties. Some borrowers charge early payment if you make the payments earlier than scheduled.
Fixed Interest rate
If the market rate is decreasing, the interest rate on the installment loan will be the same. So, in the end, you will be paying more than you should.
Lastly, make sure you register all the contractual terms. Study and research thoroughly so you are able to select the most beneficial option. Head over to our website and explore funding options. For more information and tips to get an installment loan at an affordable price, follow us on Facebook (@Onlinecheck) and Twitter (@Onlinecheck). If you have any question, feel free to call us on our toll-free number at (833) 827-4412, our loyal and keen financial advisor will answer every question and guide you throughout the way.