Have you ever needed to pay off a large sum of money but needed it to be split into smaller amounts over an extended period in order to be paid? If yes, then an installment loan was the right option at that moment. Interestingly, you could probably have used one already, but you just don’t know what it is called in financial terms.
It is very common for people to be unable to make the entire payment for school fees, a house, a car, or some other necessity all at once. Anyone in this situation can opt for online installment loans for bad credit at WeLoans to get what they need. Installment loans are specially optimized for almost all circumstances, and the debtor gets to pay back the money as they earn it under the terms of the agreement.
Installment loans are a great option for most people because there are always different options available for every specific situation, and they get to select the most ideal of all of them. Lucia Jensen, CEO of WeLoans, says that users can access these loans even with bad credit scores, so this meets the need of people who need to make instant payments but do not have a good credit history. To know more about WeLoans, visit their website.
In this article, you can learn everything you need to know about installment loans and how whether they are an ideal choice for people looking to borrow money.
An Overview of Installment Loans
Installment loans refer to a wide variety of credit instruments that are presently available. Student loans, auto loans, mortgages, Buy Now, Pay Later loans are all examples of installment loans. The feature they all share that puts them in the same category is that they allow the person to borrow a lump sum and pay it back in small bits over an extended period of time.
With an agreement for this type of loan, the borrower gets a fixed amount of money, and the agreement stipulates a payment plan where the money is paid back in fixed amounts on a clear schedule. Every one of these payments includes a portion of the total amount that was borrowed, along with some interest. The exact amount to be paid periodically is clearly stated, and this gives the borrower enough room to prepare for each payment.
Who Is Eligible to Get Installment Loans?
When you are accepting debt that requires steady periodic payments, the lender must be able to ascertain that you can actually pay back the amount that is being borrowed. This is why not just anyone is eligible to receive these loans freely. They are not only available for individuals, but corporate institutions like companies can also apply and receive them after meeting the necessary requirements.
The exact requirements for eligibility for an installment loan differ across the type of loan and the lending platform that is used. As a general rule, the borrower needs to be above 18 years to use most financial services.
In addition, with this type of debt, the lender needs to ensure that the borrower can actually continue paying the borrowed amount for the time required before giving out the loan. To determine this, the person looking to get the loan will have to prove that they have a reliable source of income that can be used to make the regular payments that are required.
The Difference Between Secured and Unsecured Installment Loans
Secured loans are installment loans that require the debtor to provide some property to serve as collateral for the loan. For some loans, the collateral for this type of credit is the property that is purchased itself. For instance, for a mortgage, the property that is purchased will serve as collateral for the mortgage that is used to pay for the house.
Unsecured loans, on the other hand, are usually just personal loans for money, so they are not tied to any property that will serve as collateral for the debt. In most cases like this, lending platforms use the borrower’s credit score to determine whether or not they are eligible to receive the loan.
This could mean that people with bad credit scores will be unable to access installment debt from most financial institutions.
Pros and Cons of Installment Loans
Now that you know what these loans are, you will find that they are actually very popular, and you have probably made use of one before. However, even though they are a great option in many situations, they are not the perfect choice for everyone. Here are some of the advantages and disadvantages of using these loans.
- Opportunity to pay off loans early
- Predictable terms for periodic payments
- Collateral and good credit score are not always necessary
- Easy access to loans to make large purchases
- Interest fees could be high
- Defaulting on payments could result in having a bad credit score or loss of collateral
- Easy access to large amounts can be overused unnecessarily
What Should You Consider Before Taking an Installment Loan?
Before taking any loan, you should always consider your ability to repay. Installment loans are easy to access, but if you fail to make payments when required, it can damage your credit score, and in the case of a secured loan, you can lose the property that was used as collateral for the loan.
Also, ensure that the purchase for which you are taking debt is worth it, loans from platforms like WeLoans are easy to access, but they should not be abused. Constantly taking up unnecessary debt can easily lead to financial challenges.
Are Installment Loans the Same as Personal Loans?
There is a difference between these two debt options. Personal loans give the borrower a one-time payout of cash that is paid back over installments. From this description, clearly, a personal loan is a type of installment loan. Auto loans, mortgages, student loans, and lots of others are also types of installment loans.
Final Thoughts on Installment Loans
Installment loans are very common in our society today because they give people the opportunity to pay for what they need over extended periods and get it immediately. They have become really easy to get to ease the burden of financing needs for everyone. However, they should not be abused because taking up large amounts in debt could turn into a financial burden.