An installment loan can help cover various expenses like a car repair, home improvement project, or medical bill. Once approved for a loan, you’ll get a lump sum of money and agree to pay off the loan with interest by making regular installment payments over time. Once you pay back an installment loan in full, the account will be closed. Let’s look at what installment loans are and how they can impact your credit history.
Not all installment loans are created equal. In fact, there are many different types of installment loans. While some loans are secured and backed by collateral which is an asset you own, like a house or a car, other loans are unsecured. All of them, however, have an interest rate, repayment term, and fees. Common types of installment loans include:
When you apply for an installment loan, the lender will look at your credit to determine whether to approve you. The higher your credit score, the greater your chances of approval. If you don’t have the best credit, you might still get approved, especially if you are eligible for a secured loan.
How you use an installment loan can impact your credit. If you make on-time payments, they may be able to improve it. If you make late payments, that’s likely to make it more difficult for you to qualify for financing in the future.
If you’re interested in an installment loan, follow these steps.
An installment loan can help you meet a number of financial goals. As long as you pay it back responsibly, it may also build or improve your credit score.
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