Are Installment Loans Right for You?
One of the first things to consider is whether you have the time and inclination to shop around for the best terms. While some installment loans have fair rates and fees, others may charge more than 100 percent interest and tack on pricey costs to get as much money as they can from you.
If you are unable to get an installment loan from a trustworthy company, it may be better to find an alternate source of funding. Using a credit card can be safer than working with a predatory lender.
Consider Your Credit
Like most loans, installment loans tend to be easier to get if you have good credit. If you have a decent score, try working with a major bank for either an installment loan or a personal loan. Sometimes people with poor or no credit can get a loan using collateral, such as a car or valuable jewelry. However, think carefully before putting up collateral because you can lose it if something happens and you are unable to make your payments on time.
Installment loans can actually improve your credit score in certain situations, so it may be worth taking one for those reasons. Having a number of different types of credit and loans looks good to lenders. Using an installment loan to build your credit works best if you do not pay it off early, so consider if you really want to pay all the interest and fees on it.
Before deciding on an installment loan, consider how easy it is for you to say no. Many companies use strong sales tactics to try to convince their customers to roll the loan over at the end of the term. This lets you have more available cash, but it also ends up costing you in the long run. Predatory loan companies are more likely to do this, and they are also usually the ones with extremely high interest rates.
Be prepared to say no to additional services when you take out the loan. Loan companies often offer "credit protection insurance" or other types of insurance, which often have little benefit to the customer. Do your research ahead of time and only agree to services you really need.
Installment loans are becoming more popular for people who need a lump sum of cash in a short amount of time, but they have plenty of drawbacks too. Understanding the benefits and risks of these loans can help you decide if an installment loan is right for you.