When life doesn’t go as planned and you need money to get things back on track and cover bills or even if you need to make a large purchase, installment loans may be just what you need to help get you by when you come up short on cash. With an installment loan, you borrow an amount of money and pay it back in increments according to the payment schedule. If you want to learn more about how installment loans work, here you will find the answers to some frequently asked questions below.
What is an installment Loan?
Installment loans are the most commonly used type of loan. Installment loans are loans that vary in amount, but have a set payback period over a number of months. Since most of us are on a budget, the set monthly payment can be more appealing than a loan that requires full payback within a shorter period of time. The term (or length) of the loan can vary from a few months to many years such as a 30-year mortgage for example.
The amount that can be financed on an installment loan varies on the financial institution that funds the loan, if the loan is secured or unsecured, and is dependent on the credit standing of the consumer applying for the loan. The amount can range anywhere between a few hundred dollars to finance a repair, medical bill, or smaller purchase or it could be up to several thousand to finance a new home for example.
What does an installment loan cost?
An installment loan comes with an amortization schedule that breaks down the amount of interest the payback will require. The payback amount of an installment loan depends on the amount of money financed, the number of months the loan is financed for, and the interest rate given by your financial institution. To get an idea of what an installment loan could cost you, a good resource to use is this online loan calculator.
Some lenders charge set fees that are associated with an installment loan. Some of these fees can be labeled origination fees, late fees, convenience payment fees, etc. With lenders that charge fees, the payback can take much longer and be more costly than those that do not charge fees.
When are my payments due?
With an installment loan, the first payment is due between 30 to 45 days after the loan is issued. After that, there is a set monthly payment that is due either every 30 days or on a set date each month. The term of how long the payments last vary depending on the amount financed and the type of installment loan obtained.
With most installment loans there is no penalty for early payoff, and early payoff can contribute to huge interest savings. Some financial institutions offer installment loans with bi-monthly payments, which some consumers may prefer to match the payment due dates with their paydays.
How are my payments applied?
With an installment loan, a portion of each payment that is made is applied to the accrued interest and a portion is applied to the original principal amount of the loan. Paying more than the minimum payment can contribute to a principal reduction and result in early payoff on these types of loans. If your installment loan has any fees associated with it, the payment will first apply to fees, then interest, and then the principal.
What do I need to have in order to get an Installment Loan?
To get approved for an installment loan, the lender will need to verify your identity, your residence, and your source of income. If you are applying for a secured installment loan, your collateral is also needed in order to get approved. Typically you need the following documents:
- A valid government issued picture ID
- SSN Verification
- Recent proof of income (2 most recent paystubs)
- Proof of residence (utility bill or rent/lease agreement)
- Routing and Account number for open checking account (No checking account? Some lenders can still lend without this requirement)
Does an installment loan affect my credit?
Many lenders who provide installment loans will require a credit check to qualify. This is completed to determine the ability to repay and the amount of money that you can afford. Each lender determines their own standards for qualifications with some institutions being more flexible than others.
For over 20 years, Always Money Finance has been a regional leader in providing affordable credit solutions to customers across the southeast looking for a convenient and confidential way to meet their needs. Getting a handle on your money takes time, and Always Money understands. If you’re in a jam and need immediate help, any of Always Money’s small personal loan options may be just what you need to get you going in the right direction. To learn more, visit alwaysmoney.com or ask for Miriam at 1-888-618-9217 to get pre-approved over the phone.