An installment loan is merely a personal loan, but instead of borrowing money from an individual, one borrows from a bank either online or in person at a local bank. There are many different types of installment loans available, and one must first talk to his banker about the amount of cash he needs and what he needs it for, as this will determine the type of loan that is needed.
Loans are done online every day for those who trust the process without going to the bank. If one gets a loan online, it could be deposited into one’s account within hours and sometimes instantly. In addition, the bank must trust his client to pay back a large amount of money in order to lend it to him, to begin with, so the applicant will be checked out thoroughly.
A decision is made by the bank, and if approved, one usually gets a check for the full amount to cash at the bank. The money is paid back in calculated payments down to the penny with interest added. The length of the loan can be as short as a couple of months or as long as 30 years depending on which type loan one gets.
Furthermore, personal loans are repaid as both parties have agreed to via loan papers, for the specific amount set as a scheduled payment. Once the loan has all been paid, the credit will have been repaired. It is a given that a loan can improve a FICO score by taking out a personal installment loan and paying it as promised.
This positive result of paying will stay on the credit history for 10 years. Also, there are installment loans for bad credit. When there is a late payment history, it stays on the credit file for 7 years.
That all said, perhaps one can buy a house, but it would require collateral in most cases. This means the bank would need something for the value of the loan to keep so they hold the title of the house one wants to purchase until it is paid off. There are some other ways, but check with banks because homeowner loans are beneficial. Installment loans set a fixed interest rate for the life of the loan too, so feel secure knowing it cannot be raised higher.
In any case, this type of lending is called a secured loan, and credit card debt, for instance, is unsecured. When they are not secure, a lender can try to get the physical products obtained via the credit account, but more times than not a lender writes it off and benefits more from doing so rather than collecting used products. The lender can step up, take what is theirs when the loan defaults and it has been secured. Repossession can and does happen.
One reason for a personal loan is a consolidation of credit card debt, a car, a boat or whatever else one may want an installment loan to pay off. Many installment lenders are willing to let people borrow money that have low credit scores. This will help one’s credit score go up due to the credit utilization ratio. Paying as promised is always positive for one’s credit numbers and the ability to obtain better loans in the future.
Other reasons for wanting a personal loan are usually practical and ordinary uses, such as buying a vehicle, getting a home, going on vacation, going to college or something similar.
Granted, loans can help with the necessities in life, but there is caution that comes with spending. Tips would include stop using credit cards, pay as much as possible every month on the loan, double up on payments, and put any big chunks from refunds, bonuses or whatever on the balance. Make cuts to spending, pay debts with the biggest interest down, then the smaller ones. Do a small online job or freelance for extra money to put on loans, as it all does add up fast.
Remember, when there is a late payment history, it stays on the credit file for 7 years. It will affect the ability to get loans in the future, so make sure to pay on time every time. And make certain you are paying the amount due or more, never less.