The financial crisis is said to be behind us, but most people are still feeling its effects. As a result, the world of loans changed significantly as well. While there are still many types of loans around, their delivery and repayment methods are now very different, and it is important to know about this in order to get the best loan for your needs. One new product that may be of interest to you is found in the form of installment loans.
What Are Installment Loans?
Essentially, it is a quick financing method. Even people with bad credit can apply for these, because the repayments are quite low, as they are spread over a long period of time. They used to be known as personal loans, but there are some notable differences, not in the least because there are many types and uses for them.
For example, fixed installment loans are paid back through equal payments over a period of time. Often, you can decide just how many payments you want to make, and this will determine how long you will pay back for. Naturally, the longer you take, the more interest you pay overall as well.
A different type of installment loan is found in a credit card. Here, the payments are not fixed, but rather variable.
Installment loans are not payday loans. This is because a payday loan has to be repaid at the very next payday.
So how does a real installment loan work? The process is quite simply. You are provided with a loan and you must pay it back in full by a certain date. This is achieved by taking regular monthly payments out of your account. This money put together will total the entire balance of the loan, whether you make fixed or variable payments.
Installment loans can be either long or short term. The majority last for three years, which means they are technically a short term loan. However, long term installment loans do also exist, although their interest rates tend to be much higher.
It is very important that you get to know all the different types of loans that are out there in order to find the one that is right for you needs. You must make sound financial decisions in order to make sure you don’t end up sinking into unmanageable debt. Because these types of loans are also suitable for people with bad credit, they can sometimes seem to be slightly more attractive than they really are. For instance, if you are looking for a $3,000 loan, you may be offered $5,000 instead. Try to avoid this, as it simply means that you will actually have more debt and pay it back for longer.
What is important to remember is that, even if you have bad credit, loan constructions are out there that you could fall back on. However, if you can avoid applying for a loan at all, that is always going to be the better decision.