Even those with less than perfect credit have more options for financing these days. One approach that still merits your consideration is the installment loan. You already know that installment loans can be paid out in portions which makes them kind to the household budget. Did you know there are other advantages to choosing this approach? Here are five points to ponder closely before settling on a specific financing strategy.
Long Term or Short Term: You Decide
How long do you need to repay the loan? There are lenders who offer terms ranging from a few months to a few years. One approach is likely to be better for you than the other.
When you believe that there's enough income to repay the loan in a shorter amount of time, do look into this possibility. Determining if the amount you need can be repaid quickly will make it reasonable to find out if you qualify for a short term loan. When the answer is yes and you’re comfortable with the terms, that loan offer could be perfect for your needs.
An Installment Amount That You Can Afford
It’s not just about the amount you want to borrow. There’s also the matter of how much you can comfortably afford to pay each installment period. Reputable lenders consider providing a figure for the installment payments to be important. In fact, some will likely provide figures based on more than one loan term.
Why would you want to consider each installment term and the associated amount? First, you want to determine which one allows you a little extra room in the household budget while still settling the debt in what you consider a reasonable amount of time. Second, you get to project the total amount you will repay based on the loan term and the amount of the installment payment. That information further empowers you to make the choice that’s best for your situation.
Installment Loans Are Good For Your Credit Score
Perhaps your credit score is already good, and increasing it’s really not a priority right now. Even so, it helps to know that many installment loan lenders do report regularly to the major credit agencies. Some will report quarterly while remit new comments each month.
The combination of the decreasing balance and comments indicating you are managing the loan responsibly are likely to increase your credit score by a few points. Even if it’s not a priority right now, a slightly higher credit score could help you at a later date.
There Are Secured And Unsecured Options Available
Do you have assets that can be used to secure a loan? Perhaps you would prefer to avoid pledging collateral for the loan. Fortunately, there are installment loan plans that do not require any type of security. It’s up to you to decide if providing some sort of security works best or if you would like to go with a loan that does not come with this type of requirement.
While it’s not always the case, you may find that secured installment loans come with a slightly lower rate of interest. That’s because the collateral helps to decrease the risk that the lender takes on by doing business with you. Remember that until the loan is repaid in full, you cannot sell that pledged asset without the express permission of the lender.
Creating a Relationship That Will Serve You Well In The Future
Timely payments on your installment loan cultivate a stronger relationship with the lender. How would that make a difference in the years after the loan is paid in full? That lender keeps your information and payment history on file for some time. In the event that you need another loan in the future, it makes sense to revisit a lender who already knows how you manage your debts.
That future loan from a lender who knows you well could come with better terms, including a lower rate of interest. That’s true even if your income has not increased or the amount of money you have tucked away in a savings account is essentially still the same.
What could you accomplish with an installment loan today? Consider projects you want to complete around the house, or other things that would help make life a little easier. Your steady income will go a long way toward helping you find the right lender and improving your quality of life.