Borrowing money is something most people do from time to time. You can borrow money through a loan. However, loans come in different types. One of the most popular types is an installment loan. You might wonder what an installment loan is if you're new to borrowing money. So keep reading to learn about some common questions people ask regarding installment loans.
What are the basic features of installment loans?
To understand installment loans, you must know their features. An installment loan is generally a larger type of loan that a person cannot repay in just one payment. Instead, the borrower repays it through payments. The payments are all equal in size, and they can last for a few months to many years, depending on the loan size. The person pays interest based on the stated rate and current balance. Thus, a borrower pays more interest at first, as the loan balance is larger. As the loan balance decreases, the interest also decreases.
An installment loan can be secured or unsecured. A secured loan requires the borrower to use an asset as collateral, while an unsecured loan does not require collateral.
Why do people use them?
You can use an installment loan for almost any reason. People commonly use them when purchasing cars or homes. They borrow a lump sum of money to buy these things. Then, they repay them over the next few years or more. You can also use an installment loan for debt consolidation or home repairs.
What should you learn before taking one?
Before taking an installment loan, you might ask a few questions. First, you can ask about the criteria the lender uses to evaluate loan approvals. Secondly, ask about the interest rate and loan length. You might also ask if the loan comes with a prepayment penalty. This penalty requires paying a fee if you repay the loan before its due date.
How to get an installment loan
After learning the basic facts about installment loans, you might decide to get one. However, you might wonder how to get one. You can get one by finding a lender that offers them. Then, you can gather the information the lender needs to process the loan. You must also fill out an application. The lender reviews this information before approving the loan. Contact a local lender such as Time Finance Inc. to learn more about installment loans.