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Whether you’re new or old to personal finance, chances are you’ve come across the term installment loan. But – what is it exactly? An installment loan is a financing structure that provides the borrower with a lump sum upfront and the borrower repays the loan through regular payments or installments over time.
If you’re considering an installment loan, you should not only consider the product itself but the lender as well. To learn more about installment loans and how to choose the right lender for you, continue reading below.
An installment loan is any type of financing that is repaid with regular, continuous payments. A lump sum of money will be provided to the borrower upfront and the borrower will be responsible for making weekly, bi-weekly, or monthly payments. The term of an installment loan can range anywhere between six months to 35 years since a mortgage is technically an installment loan. But, more often than not, when we discuss installment loans, we’re talking about personal installment loans. The repayment term for these is much shorter, usually no more than five years.
Installment loans are typically used when a large sum of money is needed and the individual will need a long amount of time to repay it.
Many types of loans are considered installment loans since it is such a common form of financing. Below are some common examples of installment loan types you’ll come across. Installment loans can be secured or unsecured.
The total cost of an installment loan depends on the lender and specific terms and conditions. You can find detailed information about the costs in the loan contract extended by the lender. The costs you should look out for include:
Is a personal installment loan better than a payday loan?
Before proceeding with an installment loan, you should take a minute to consider the pros and cons to determine if the loan product aligns with your financial goals.
Applying for an installment loan is the easy part. The hard part is sifting through different lenders and selecting one that will work for you and your finances. Do some research on installment loan lenders in your area. Once you find an optimal lender, you can apply online or at their branch, if they have one. Either way, once you’re approved you’ll have money in your hand within a day or two.
With the explosion of private online lending, many lenders have entered the installment loan market. While having a choice is great, it can be difficult to sift through thousands of potential lenders. When researching installment loan lenders, consider the following factors:
Frequently Asked Questions
Is an installment loan better than a payday loan?
What do I need to qualify for an installment loan?
In addition to the above, you can expect that lenders will look at your credit history, employment status, and income to determine if you qualify for a loan. Installment loan lenders are quite flexible with credit scores. They will simply want to assess how you have repaid debt in the pastCan I get an installment loan with bad credit?
The best way to determine if an installment loan is right for you is to assess your current financial situation, your needs, and your goals. If you’re interested in in being matched with an installment loan lender, Loans Canada can help.
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