Heard of the term “installment loan” but don’t know what it means or how it works? You’re not alone. Many providers offer installment loans, and you might already have one. Installment loans are credit accounts that you pay back over a set amount of time. Here’s a brief guide on installment loans and how they work to aid your understanding.
What Is an Installment Loan?
An installment (or term) loan provides the borrower with a sum of money upfront, which they repay in monthly installments over the loan’s term. If the loan’s term is short, providers refer to them as short-term loans. However, most installment loans are for larger amounts, and loanees repay them over several months or years.
How Do You Repay It?
As previously stated, installment loanees typically make repayments monthly. These payments are generally a specific amount, but most companies will allow you to pay more. The more you pay, the lower your principal and interest sums.
Different Types of Installment Loans
There are several types of installment loans, but they fall under two distinct categories: secured and unsecured. You need a secure loan if you need a collateral asset. If not, apply for an unsecured loan. Each loan has different terms and conditions, so it’s always best to shop around before selecting a lender.
Here are some common installment loans:
- Auto loans
- Student loans
- Buy now, pay later loans
Thinking About Applying for an Installment Loan?
An installment loan is a great option for many scenarios and situations, such as making a big purchase or consolidating your debt. The best part is that if you make your payments on time and pay them off as agreed, your credit score can improve!
Now that you know what an installment loan is and how it works, you might consider applying for one. If that’s the case, we’re the lender for you. At Superior Financial, we provide auto loans and more for those making large purchases. Contact us today with any questions or inquiries!