Life happens and unexpected expenses, with even planned events such as a wedding or home improvement project, can send any household budget into a frenzy. Not only that, but the stress alone can also take a toll on your health. In these instances, taking out an installment loan may be the answer to your problems.
What Is An Installment Loan?
An installment loan generally has set scheduled payments due on a particular date each month. Some examples are your mortgage, a car loan and student loans. Generally, the determined interest rate comes from the market and your credit score. Before increasing your monthly budget, make sure that you are comfortable with the amount you’ll have to pay. Your credit score will be impacted by late payments. Perhaps an installment loan will avoid that.
There are also other types of loans with short-term repayment terms that might offer a better option. While the payments each month will be higher, you will lose the loan faster, paying it off in months instead of years. A payday loan is an easy to acquire loan well-suited for someone that does not own a home and has a less than stellar credit rating. However, this type of loan also comes with high-interest penalties, sometimes even more than the initial loan itself and the terms of repayment are limited. Yet another choice and a better alternative to the predatory payday loan is to look at fast installment loans. Personal cash loans and installment loans in amounts up to $1250 as an alternative option to payday lending. Key benefits include minimal eligibility requirements, fast-funding and flexible repayment. Qualified applicants must have a social security number, an active checking account, and a verifiable source of income.
Impact of Installment Loans
Taking out an installment loan can also help you improve your credit score. This, of course, depends on how many other open sources of credit you already have. If you have only a couple of credit cards and a mortgage, an installment loan paid on time will show credit worthiness. However, if you already have many credit cards with high balances, a car payment and a mortgage, your debt to income ratio could be a red flag for a potential lender.
Ultimately, it’s always best to plan for a major purchase, an event or a remodel. Have funds set aside in a savings account for these purchases. This way there is no pending bill that will increase your monthly expenses. Of course, if it’s something that’s unavoidable, you have to go with the option that works best for your situation. Installment loans offer an affordable way to pay for the expense over time. If you have a mortgage in good standing, check with the bank you use first. You may qualify for a HELOC or a personal loan. The interest rates are generally lower and repayment terms can range from a few years and up.
When it comes to taking on debt always make sure that it’s something you can handle and something that you need now. Establishing a savings account and building up the money so that you can pay it off without interest is the better way to go. If it’s a home improvement project or a car payment, delaying the purchase or work order until you have the money saved can help you enjoy your life to the fullest without the added stress of being just one paycheck away from poverty.