If you find yourself in need of quick cash to cover an urgent expense or if you wish to make a significant purchase while spreading out the payments, considering an installment loan could be your ideal solution. Gain insights about installment loans below and discover how Wise Loan can assist you in this process.
What Is an Installment Loan?
An installment loan is a form of debt that you repay in predetermined installments over a specific period of time. When you opt for an installment loan, you agree to borrow a fixed amount along with an interest charge. Interest represents the fee imposed by the lender for granting you the loan. Typically, your installment payments consist of both interest (which goes to the lender) and principal (which reduces your outstanding balance).
These installments, or payments, are made according to a prearranged schedule. Monthly payments are one of the most common setups for installment loans, frequently seen in mortgages, auto loans, student loans, and personal loans. However, certain loan agreements may involve weekly or biweekly installments, which means you make payments more frequently, albeit in smaller amounts compared to monthly payments.
7 Benefits of Installment Loans
Installment loans are widely prevalent, and it’s highly probable that you or someone you know is currently in the process of repaying one. The popularity of these loans can be attributed to the numerous advantages they offer to borrowers. Discover seven benefits that you could potentially avail yourself of when applying for an installment loan.
- Quick and Easy Application Process
Personal installment loans typically offer a streamlined and expeditious application process. The simplicity of the application usually corresponds to the loan amount involved. For instance, obtaining a mortgage loan, which entails borrowing a substantial sum over an extended period, is generally not a quick and easy process. Given that mortgage loan terms can extend up to 30 years, banks and lenders undertake more thorough due diligence to mitigate risks before granting home loans.
In comparison, auto loan applications tend to be more straightforward and faster. You can complete a few-page application online or at a dealership and potentially receive loan approval on the same day.
When it comes to personal installment loans for smaller amounts, such as those available through Wise Loan, the application process becomes even easier. Our application typically takes just a few minutes to complete, and you often receive approval within a few minutes as well.
- Installment Loans Provide Fast Cash
Personal installment loans provide a convenient solution for accessing funds during emergencies or urgent situations. Here are several ways in which installment loans can expedite the process of obtaining funds in your account:
- Simple approval requirements: Many online installment loans have straightforward approval criteria. Often, there’s no need to gather and scan documents to demonstrate your current debt, credit history, or income. In certain cases, all that is required for a successful loan application is a valid ID, your residential address, and a qualified checking account.
- No need to improve your credit: Some personal loan lenders, including Wise Loan, do not mandate excellent or even good credit for loan approval. This means you can bypass the need to spend time improving your poor credit before being eligible for a loan.
- Expedited funding options: If approved for a loan from Wise Loan, we can disburse the funds in as little as one business day. In certain instances, you may even qualify for same-day or instant funding, with the money being deposited directly into your bank account.
- Fixed Monthly Payments
Installment loans differ from revolving lines of credit, such as credit cards, in several ways. When you have a credit card or another line of credit, you are given a specific credit limit. You can borrow money up to that limit, repay the borrowed amount, and borrow again within the same limit. The monthly payment on your revolving credit account depends on your terms and the portion of the credit limit you have utilized.
On the contrary, an installment loan involves a fixed monthly payment that includes predetermined interest charges. You are aware of the exact amount you need to pay each month, and this remains consistent throughout the loan term, even if it extends to 12 months or more. This predictable payment structure makes it easier to stay on track with your installment loan schedule.
It’s worth noting that not all of your monthly payment is allocated towards reducing the principal balance of your loan. For example, if you owe $1,000 and make a $50 payment, the remaining balance won’t automatically become $950 the following month. A portion of the $50 payment goes towards covering the interest charges associated with the loan.
- Manageable Repayment Schedule
Having a fixed monthly payment offers significant advantages in terms of budget management. When operating within a tight budget, an installment loan proves to be the most manageable form of debt because you can plan and prepare for the payments, knowing that the amount will remain constant. Additionally, installment loans distribute the payments over an extended period, often making them more affordable.
For instance, imagine you require $2,000 to repair your car so you can commute to work or $1,500 to fix your home’s HVAC system and maintain a safe and comfortable environment for your family. If you are living on a budget, you might have only $200 of extra income available for such expenses. By opting for an installment loan, you can cover the urgent cost and make payments over time that align with your budget, instead of having to gather the entire amount upfront.
Another aspect that enhances the manageability of installment loans is their fixed duration. As long as you adhere to the agreed-upon payment schedule, you have a clear understanding of when the loan will be fully repaid, eliminating the expense of monthly payments. This ability to plan for the future enhances your financial planning and helps you secure a more stable financial outlook.
- Build Your Credit With Installment Loans
Your credit score often plays a significant role in determining your eligibility for an installment loan or other forms of credit. However, even if you have bad credit, you can still qualify for an installment loan, thanks to lenders who specialize in offering loans for individuals with poor credit. These installment loans for bad credit are designed to provide a second chance for borrowers and assist them in rebuilding their credit for the future. It’s important to note that these loans may come with a higher interest rate due to the increased risk the lender assumes when granting credit to individuals with bad credit.
When you opt for a bad credit loan from a lender, it’s crucial to consider the long-term impact on your credit. By making all your loan payments promptly and as agreed, you have the opportunity to improve your credit standing. Timely payment history is the most significant factor affecting your credit score, so demonstrating your ability to make payments on time carries substantial weight.
However, it’s important to ensure that the lender you choose reports your payment history to major credit bureaus. This ensures that your positive payment history is reflected across all your credit files. Wise Loan, for instance, reports payment history to two of the three major credit bureaus, unlike many traditional payday loan lenders who do not provide this reporting service.
- Higher Loan Amounts for Big Purchases
Installment loans play a crucial role in enabling individuals to afford significant purchases that may otherwise be financially challenging. For instance, funding a home or car purchase solely from personal savings is beyond the means of most people, which is why installment loans are frequently sought after by buyers in such circumstances. However, the benefits of installment loans extend beyond these specific examples, as they provide the opportunity to stretch various types of purchases over time, enhancing accessibility. While the following list is not exhaustive, here are some examples of items that can be acquired with the help of installment loans:
- Laptops and other computer equipment
- Smartphones
- Furniture
- Recreational vehicles, such as ATVs or boats
- Large appliances, such as refrigerators or washing machines
- Fine Jewelry
By utilizing installment loans, individuals can make these purchases more attainable, as they have the flexibility to distribute the payments over a set period, easing the burden of upfront costs.
- Save on Interest: Pay Off Installment Loans Early
Despite the fixed nature of payments required for installment loans, they still offer considerable flexibility. It may be possible for you to make additional payments towards your loan or increase the amount paid with each installment to expedite its repayment. However, it is crucial to ensure that any extra payments are allocated towards the loan’s principal balance. By reducing the principal ahead of schedule, you can effectively lower the total interest cost of your loan since interest is calculated based on the principal amount.
It’s important to note that certain lenders impose prepayment penalties as a means to compensate for potential interest loss on the loan. It is advisable to carefully review the fine print of your loan agreement or consult your lender to ascertain any associated fees or penalties before you proceed with an early repayment plan. Being well-informed about the terms and conditions will help you make informed decisions regarding your loan repayment strategy.
Installment Loan Examples
Throughout this article, we have discussed several prevalent examples of installment loans. These include:
- Mortgages
- Auto loans
- Student loans
- Personal loans
- Loans for specific items such as furniture or jewelry
What distinguishes a loan as an installment loan is not the nature of the purchase or its purpose. Rather, it is defined by the agreement to borrow a specific amount and repay it through fixed monthly payments (or as per another agreed-upon schedule) over a designated period. This characteristic holds true for all the aforementioned types of loans.
Responsible Lending With Wise Loan
When considering an installment loan, regardless of its size or purpose, it’s essential to approach it as a significant financial decision. To ensure a reliable and trustworthy lending experience, it is crucial to choose a lender you can depend on. At Wise Loan, we take pride in responsible lending practices. We provide accessible loans to individuals without requiring excellent credit and work closely with borrowers to assist them in building their credit by reporting their payments to two of the three major credit bureaus.
Experience the advantages of a fast and straightforward application process, along with the possibility of same or next-day funding, by applying for a loan from Wise Loan today.
Please note that the recommendations provided in this article are intended for informational purposes only. Wise Loan does not guarantee the accuracy of the information presented, disclaims any liability for errors, omissions, or misrepresentations, and holds no responsibility for the outcomes of any decisions or actions taken based on the information provided.
Apply for a loan from Wise Loan today and get the benefit of a fast, easy application process and funding the same or the next day.
The recommendations contained in this article are designed for informational purposes only. Wise Loan does not guarantee the accuracy of the information provided in this article; is not responsible for any errors, omissions, or misrepresentations; and is not responsible for the consequences of any decisions or actions taken as a result of the information provided above.
More information on Installment Loans and how they work in your state:
