If you’re looking to pay off debt, purchase a new car, or fund a vacation, you’ve probably considered getting an installment loan at some point. A loan of any type can be risky if you’re not well versed in what it is and how it works to get the best benefit from it.
Like any financial product, an installment loan comes with pros and cons you should consider before moving forward with one. Continue reading to learn the advantages and disadvantages of buying things on installment.
An installment loan is a loan you can repay over a set repayment term, usually every month. While there are many types of installment loans, the most common ones include personal loans, mortgages, car loans, and student loans.
Before we dive deep into the benefits and drawbacks of an installment loan, let’s go over how it works. With an installment loan, you’ll receive a lump sum of money upfront. Then, you’ll pay it back with interest and fees via regular payments or installments. Once you repay your loan, the account will close.
The most noteworthy advantages of installment loans include:
Here are the major downsides of installment loans:
Installment loans are valuable financial tools. Before you pursue one, however, consider its pros and cons. Also, explore alternative options to make sure you choose the ideal financing solution for your unique situation.
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