Understanding the Financial Concept of Loans by Installment
The financial crisis hit us all really hard and, while we are told that it is now truly behind us, many of us continue to struggle financially. One area of the market that has boomed in the face of this adversity is the lenders’ market, even though they were part to blame for the crisis in the first place, through irresponsible lending practices. Since the crisis, however, they have been able to diversify in the types of loans they offer for all kinds of situations, and one of the most popular ones is the installment loan.
What Are Installment Loans?
Very simply put, installment loans are designed for people with bad credit who need money fast. They are loans that are repaid on a monthly basis over a certain period of time, usually several months. They are, as such, very much like personal loans. However, they have a different presence on the market, and certainly also very different requirements.
There are different types of installment loans to choose from as well. These include:
- The fixed loan, where you pay a set amount of money each month for a set period of time. Generally, you can negotiate how long you have to pay over, although you must remember that the longer you take, the more you will pay in interest.
- The credit card loans, which are open end and require you to pay a variable amount each month.
Installment loans are not the same as payday loans. While they both offer small amounts to borrowers, a payday loan has to be repaid in full by the next payday, whereas an installment loan is paid back over a period of time.
Installment loans are quite easy to understand. You can use it in any way you see fit, and you have to pay it back on an agreed date. Before that date, you may monthly payments, either fixed or variable. Once your term is up, you have to repay whatever balance is left outstanding.
There are both short term and long term options, so you need to think about what your personal needs are. Generally, the loan will mature in between three and five years, but there are now also many that mature after just a few months. Again, it is important that you look into what does and does not work for you and your personal situation and budget.
Installment loans offer quite favorable terms to their borrowers, as lenders understand that it is generally people with bad credit and other financial difficulties that apply for them. As such, they only have to pay the money back slowly. Because they can be arranged very quickly, they are also popular for those who have medical emergencies or vehicle emergencies, for instance.
There are generally few requirements for someone to be accepted for this type of loan and they are available both for people with bad credit and those who have a bankruptcy filing against them.
