Pros & Cons of installment loans
Installment loans are extremely profitable as you borrow once and then pay off a debt gradually with a help of payments that are fixed by your lender and agreed with you.
Advantages Of Installment Loans
Bigger Payment: You can pay your debt off quicker with bigger payments or slower with fewer payments. Your installments depend on your ability to pay them.
No Credit No Problem: The other attractive thing about installment loans lies in your opportunity to take them, even though you have a bad credit. Most of the financial companies offer best installment loans for bad credit. This option is really useful while most of the loans don’t provide it.
Minimal documentation required: Normally, installment loans don’t need much documentation, as compared to a home loan or car loan. Hence the processing time is quicker.
No collateral or security needed: No need for security is required to obtain this loan and the loan tenure is much shorter compared to home loan or car loan. This has less risk for the borrower comparatively, since if you are unable to repay the loan, your security is forfeited in case of other loans. As installment loans don’t need any security, your assets are safe. This makes this kind of loan attractive to those who don’t own any assets like car, home, shares etc.
Disadvantages Of Installment Loans
High interest rates: As these loans don’t need any security, they are regarded as high risk by the lenders. In order to offset their risks, these loans carry very high interest charges.
No part payments: Most lenders don’t allow part payment of loans. This means you end up paying the loan for the entire tenure of the loan. It can work out quite expensive, since your initial installment go towards interest payments.
Variable loan and interest as per your credit rating: Even those lenders, who offer loans to the borrowers with poor rating, end up offering lower principal amount and higher interest as compared to those given to borrowers with good rating. They also impose stricter repayment terms on these borrowers.
Advertise fees: The trickiest thing about installment loans is that lenders don’t advertise fees and different forms of credit insurance that increase the sum of money you will have to pay off.
The solution is simple – Please review different financial companies and their terms. Afterward, choose the most profitable offer. Keep in mind that a tempting offer isn’t always reasonable!
Don’t Use Installment Loans For:
* To pay off credit card debts
* To invest in the stock market
* To lend the funds to others
* Any other needs / things that might really wait and are unnecessary / not urgent now!
A installment loan comes with a responsibility to repay the EMIs on time and clear off the loan at the earliest. This also helps maintain a good credit score.