An installment loan is a loan that allows you to pay back the loan with a number of scheduled payments over an agreed amount of time. Today, we are discussing the different types of installment loans so you can see which one is ideal for you. Keep in mind credit cards work in a similar manner but they are not considered installment loans.
Unsecured Installment Loans
Unsecured installment loans are usually for a small amount of money and have higher interest rates. However, they happen to be the most common type of loan found online. With this specific loan, you receive the money from the financial institution and pay back the loan over an agreed amount of time. You can utilize this loan when you need money only for a short period – 5 years or less. Lastly, when you make your payments on time it can help you rebuild your credit.
Student loans are another type of installment loan. With student loans, you receive a set amount of money for your educational costs and then once out of school you pay back the loans by paying a set amount each month. Student loans also allow you the option of deferring your payments when you are unemployed for a period but you will have to pick back up payments once you are employed again.
When you take out a mortgage loan, you are able to finance your house and pay back the loan over a set amount of years. It is important that you stay current with your payments or you could risk losing your home and damaging your credit.
When you need a car but do not have the money to afford one up front, taking out a car loan can be ideal. However, similar to mortgage loans if you do not pay back the money as scheduled, you put your car at risk of being taken back.
Installment loans can be a good idea for individuals and businesses that need to obtain items but do not have all of the cash up front. However, it is important to remember that you have to make your payments on time each month or you risk losing your investment. Installment loans can help you build your credit but if you do not make your payments on time, you will find that they will do more harm to your credit than good.
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