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We get it. You have big plans. But no cash.
Don’t worry; it’s a common problem. You need a loan. And while you might need a lone, you’re not alone. Personal loans are becoming the most popular way to borrow money.
If you’re looking for a large chunk of cash, chances are you need an installment loan. Don’t know what that is? You’ve come to the right place. We’re here to explain everything you need to know from what is an installment loan to how to get one.
So let’s get going so you can get that money you need.
What Is an Installment Loan?
An installment loan is when you agree to pay a fixed monthly payment over the length of the loan.
For example, if you want to borrow $20,000, you would have to pay that back by paying fixed payments over a specified amount of time, plus any interest.
Lenders look at your credit score, annual income, income to debt ratio, and other factors to determine the amount they will loan you and the interest rate that will be applied.
Examples of installment loans
Here are some of the most common types of installment loans that consumers have:
A mortgage in an installment loan that is used to borrow money for a home. Because houses are expensive, it takes anywhere from 15-to-30 years to pay off the loan.
When someone buys a car, they often need an auto loan. These loans usually have a term of 1-to-5 years depending on the type of car and the lender.
Personal loans are used for a variety of reasons. Many people use personal loans to consolidate debt or to pay off medical bills.
Personal loans are often harder to get and require a higher interest rate. This is because there is no collateral — like a house or a car — to fall back on if the borrower defaults on their payments.
How to Qualify
If you are serious about getting an installment loan, there are a few things you’ll need to check before you start.
The first step is to check your credit score. The higher your credit score, the less risk you appear to be to lenders. This means your chances of approval will be higher.
Get a copy of your credit history by getting a free report at annualCreditReport.com. You are allowed to this once a year.
To qualify for an installment loan, you’ll need to show proof of steady income. Be prepared to show pay stubs, tax returns from previous years, and bank statements.
You can find your DTI ratio by adding up all your debt and monthly bills and dividing it by your monthly income. Most lenders prefer a DTI ration of 35% or less. Work on trying to lower your DTI ratio.
Where to Find Installment Loans
There are a few places you can go to apply for a loan this includes traditional banks or credit unions.
Just remember that every place you apply at will want to pull your credit score, and every time you pull your credit score it goes down a little. Also, before you can get a loan from a credit union, you’ll need to become a member.
One of the easiest ways to apply for a loan is online. Think of the online application process like the loan express. Applying online is fast, efficient, and funding is instantaneous.
Installment Loans 101
Now that you’ve completed the crash course, you know what is an installment loan. Now, go out there and get the cash you need. And remember, we’re here for any other financial news you may need.