Several among you could be going through financial backlogs at the moment and are planning to seek a loan. Among the vast range of categories, installment loans have been one of the favorites for borrowers because of their secure payback options and a lower rate of interest.
However, if you're a first-timer, you'd have to get your basics clear before you apply for one.
Your Eligibility For Applying For One
Installment loans may or may not involve a mortgage or collateral, but the borrower is to repay the principal sum along with a percentage of interest as decided in prior. This makes it very important for the borrower to have a strong credit history. In cases when your credit score is low, you are likely in need of a guarantor with a higher score to vouch for you.
Moreover, your debt to income ratio is also vital if you're to deduct a portion of your monthly income as a payment to the lender.
How To Avoid Risk Factors
There's nothing wrong with borrowing a sum to make your ends meet for the time being, but you need to be specifically mindful of the surrounding risk factors. A traditional bank with a local branch is the most reliable spot as you are likely to be more aware of its proceedings, and hence, there are reduced chances of fraud.
Ensure that you do not give out any bank details, or sign up for any payments before taking the loan. Moreover, make it a point to verify the location, terms and conditions, and claims in your presence. You must go through their online and offline reviews, and you shouldn't ignore any red flags.
Where Do You Take An Installment Loan From
Although there could be several lending points both online and offline from where you can borrow financial aid, it's suggested that you're careful during the proceedings.
Numerous credit unions and online lenders can be shortlisted for your installment loan, but your source must be reliable, preferably a bank that you've been accustomed to.
Upsides Of Applying For An Installment Loan
Installment loans can work like your ladder to building a solid credit record for future dealings. This would make it easier for you to borrow money as you'd already been familiar with the terms. Moreover, you need not be stressed about changing interest rates unlike other sources as for installment loans the rate of interest is comparatively low and fixed.
Downsides Of Installment Loans
Although you're free to opt for either short or long term loans, at scheduled payment options, there are certain downsides of loans. Not only would you have to pay a fine in case of delayed payments, but you're also charged with pretty rigid prepayment penalties.
The documentation policies are stricter when compared to title loans and might also involve collateral, which increases the risk proportion of the transaction. Moreover, low rates of fixed interest often trap the borrower to apply for a sum more significant than the actual requirement and generate payback troubles.
