Installment Loans Are the New Unsecured Credit
Installment loans are unsecured loans with a fixed monthly installment. When you take out an installment loan, you agree to borrow a certain amount of money in a lump sum. A repayment term is then set and a fixed monthly repayment amount - including charges and interest - is what you need to cope with in order to repay the loan at the end of the term.
Installment loans are the new unsecured credit simply because you don't have to place a collateral against the loan. In return, the lender will charge you a relatively higher interest compared to secured loans. Since the monthly repayment amount is predetermined, managing this type of loans is also very easy to do.
So how can installment loans be used responsibly? There are a few tips you can use to get started with maximizing the benefits of installment loans.
Borrow only the amount of money you need. It is tempting to borrow more than what you actually need, especially with the monthly installments being highly affordable. However, borrowing more means paying more on interest and other charges, which in return makes using the loan less beneficial.
Set the repayment term correctly. Lenders give debtors the freedom to choose a loan repayment term they are comfortable with the most. Most installment loans such as personal loans can be stretched all the way across 5 years of repayment period. The key to maximizing the benefits of using the loan is finding a nice balance between affordable monthly payment and low total cost of using the loan.
Work with a reputable lender. There are tons of financial institutions offering unsecured loans in the form of installment loans, but you need to take out a loan from a reputable lender only. Compare loan offers and check lenders' track records before finalizing your decision to take out the loan. You can avoid dealing with hidden charges and high interest rate by working with a trustworthy lender that maintains good track records.
Keep your loan to income ration at the appropriate level. If you are spending more than 30% of your monthly income on loan repayments, your personal finance is not at its healthiest state. Try to keep this particular ration checked before taking out new loans to have a healthy financial balance.
Now that you have the best tips in hand, getting the money you need by taking out an installment loan wouldn't be a problem.