Learn what are installment loans and of the different benefit afforded to the bank as well as the customers by this repayment type.
What are Installment Loans?
An investment loan is a type of loan that allows you to borrow a specified amount of money from lender and pay back the borrowed amount plus interest in a series of fixed monthly payments. An installment loan is a good type of loan when you want to pay for part of your education, home or car. There are several things that lender will look at to determine whether you qualify for the loan or not. The lender will look at your annual income, your credit score and your debt-to-income ratio. Your debt-to-income ratio helps the lender to know how much your can afford to pay every month.
Benefits to borrowers
Installment loans have very many advantages to borrowers. That is why they are so appealing to many people. The key advantages of installment loans to borrowers include;
1. Predictable monthly payments
Installment loans have a fixed rate of interest. This makes it easy for you as the borrower to predict the amount of money that he will be required to pay every month. A fixed interest rate is good for the borrower because he will not have to worry about increased rates in future.
2. Lower monthly payments
Long loan repayment terms mean that you are going to make low monthly payments. This helps to make loan repayment less stressful.
3. Fast processing
Generally speaking, it does not take long to have the money you need when you apply for an installment loan.
Advantages to lenders
The lender usually takes time to gauge whether the borrower has the ability to repay the loan. This decreases the chances of lending a person who does not have the ability to repay the loan. In most cases. The borrower has to provide proof of income, government issued ID and at least two references.