An installment loan refers to a loan wherein a set of number of scheduled payments are made over time. For instance, Jane wants to borrow money worth $1,000 for an emergency medical expense. Jane can take out an installment loan requiring her to pay the amount back in twenty-four months at a 25% interest rate. In an installment loan, Jane can get a check worth $1,000 and pay regular monthly payment of $53.37 for a period of 24 months. What makes an installment loan different from a payday loan? Generally, payday loans are short-term, with higher interest rate, and are usually paid back as a single lump sum payment on the borrower’s next pay period. On the other hand, an installment loan lasts for many months and payments are spread evenly over the term of the loan.
For people who have a poor credit, bad credit, or no credit history, installment loans are the best option to build credit. Installment loans are requiring multiple payments, helping in creating a history of repayment. If you are making timely payments, you can build a good credit history because a borrower’s payment history is reported to credit reporting agencies. Installment loans can help Jane establish a good credit history for better business transactions. An installment loan is a good solution for those needing extra funds that beyond cash advance can offer. As compared to payday loans, installment loans offers more flexibility to borrowers because the borrowers can decide the length of time they need to repay the loan and the amount they want to borrow. A borrower can decide on smaller payments for a longer payback period or a shorter loan term with larger payments. Installment loans are not yet available in all states, with some states dictating the maximum and minimum loan amounts that can be borrowed in an installment loan.
In an installment loan, there are associated fees and interest charges, and these fees and charges must be written and explained in the lender’s loan agreement, and notifications must be sent to the borrower if late fees apply if ever the borrower is unable to make payments on time. It is important to be aware the lenders must express all charges and fees in dollar amount including the annual percentage rate (APR). Allow Bonsai Finance to help you get an installment loan so you can create a good payment history, most especially if you are dealing with a bad credit or poor credit standing. Allow us to be your ultimate partner when it comes to installment loans, to help you create a good credit history, and establish a good credit standing over time.