An installment loan refers to a loan wherein a set of number of scheduled payments are made over time. For example, Jane needs to pay $1,000 for an emergency medical expense. Jane takes out an installment loan, needing paying the amount back within 24 months period at a 25% interest rate. In an installment loan, Jane can get a check worth $1,000 and pay regular monthly payment of $53.37 for a period of 24 months. What is the difference between a payday loan and an installment loan? Generally, payday loans are short-term, with higher interest rate, and are usually paid back as a single lump sum payment on the borrower’s next pay period. On the other hand, an installment loan lasts for many months and payments are spread evenly over the term of the loan.
Installment loans are usually used to help to build credit for those who have a poor credit, bad credit, or no credit history. The reason for this is that installment loans are requiring multiple payments over time, helping create a good history of repayment. Installment loans can help in improving an individual’s credit score most especially if the borrower makes timely payments. Having a bad credit can really ruin your finance reputation most especially if you make business transactions, so dealing with an installment loan can help build and establish a good reputation. If you are needing extra funds that go beyond what cash advance can offer, one good solution is an installment loan. As compared to payday loans, installment loans offers more flexibility to borrowers because the borrowers can decide the length of time they need to repay the loan and the amount they want to borrow. A borrower can decide on a shorter loan term and make larger payments or vice versa. Installment loans are not yet available in all states, with some states dictating the maximum and minimum loan amounts that can be borrowed in an installment loan.
Installment loans involve applicable fees and interest charges, and if the borrower is unable to make on-time payments, then any late fee must be notified to the borrower before application and collection. You need to make sure that if you are planning to get an installment loan, the lender should clearly express all fees and charges in a dollar amount as well as an APR or annual percentage rate as required by the U.S. law. Allow Bonsai Finance to help you get an installment loan so you can create a good payment history, most especially if you are dealing with a bad credit or poor credit standing. Allow us to be your ultimate partner when it comes to installment loans, to help you create a good credit history, and establish a good credit standing over time.