An installment loan is a one-time loan of money that you make payments on, called installments, over a period of time. Depending on the lender, you may or may not pay interest. Once the loan is paid back, the account is closed.
You may already have an installment loan and not even realize it. Here are some different kinds.
1. Personal Loan
A personal loan is one in which there is no collateral involved, meaning the lender can’t take something you own if you don’t repay. Because there’s no collateral involved, a personal loan tends to charge a higher interest rate than other types of installment loans.
People typically obtain personal installment loans to repay several bills they owe, also known as a debt consolidation loan. You can obtain such a loan by contacting MaxLend. Check out Maxlend Reviews to get a better idea. With MaxLend, lenders provide you with enough money to pay off your bills and have one monthly payment.
2. Student Loan
A student loan is another example of an installment loan. These are also unsecured loans provided by the government to help pay for college. You usually don’t have to start paying until you graduate and find a job. The annual percentage rate on such loans is typically low.
3. Auto Loan
If you’ve ever seen an ad for a car dealership, you’ve likely heard the phrase “No money down.” Auto dealerships will offer an installment loan to pay for a new car. With such loans, the car works as collateral, and the dealership can repossess your vehicle should you fail to pay back the loan. For that reason, the interest rates on auto loans tend to be low.
Such loans are typically for five years and are an affordable way to buy a car.
You might not think about a mortgage as an installment loan, but it is, only taken over a longer time, typically between 15 and 30 years. Because the house serves as collateral for a mortgage, the interest rates tend to be lower than with other installment loans.
You also have to put money down to qualify. If it’s your first home and you plan to live in it, you’ll be required to put far less money down than for an investment property. As with other installment loans, the more you pay toward the principal, the less interest you end up paying overall.
5. Store Loan or Deferred Payment Plan
If you’ve ever gone into a store and seen signs advertising that you can take it home today and pay later, you’ve seen a promo for an in-store credit or deferred payment plan. Oftentimes, the store offers an installment loan with no interest up to a certain amount of time, usually 18 months to two years. If you can pay off what you owe within that, it can be a great way to obtain high-priced items you need, such as a laptop computer. If not, you pay interest.
Installment loans can be a great way to obtain high-priced items, so long as you’re wise and pay them off quickly.