In world financial practice, there are loan products, according to which the borrower is obliged to return the full amount of the loan by a certain date. However, installment loans differ from other products in the fact that the borrower is given the opportunity to repay the loan gradually over a period of time.
General Notions About Installment Loans
The term ‘installment loans’ is used in relation to classic consumer credits (ordinary consumer loans in cash, mortgages, etc.). Under the terms of such a loan, the repayment of the debt occurs partially, usually monthly. Such a repayment scheme is convenient enough for the borrower, as the debt is repaid in installments, which does not undermine your budget.
Periodic payments can be equal (they are called annuity), and they can decrease each period as the body of the outstanding loan shrinks (they are called differentiated). In the framework of annuity payments, at first the borrower repays mainly interest, and a small portion of the periodic payment is spent on repayment of the credit body itself. In the future, the share of payment that goes to pay off interest is reduced, and the part that goes to pay off the body, on the contrary, increases. With the differentiated method, the monthly payment is formed as some part of the loan body plus interest, the amount of which is determined based on the remaining outstanding amount. That is, at the initial stage, the monthly payment is higher than with the annuity mechanism, but in the future, it will be significantly reduced.
Goals Of Installment Loans
Best installment loans can be used to purchase goods and pay for services. The use of such credits depends on the financial needs of the consumer. For example, a long-term personal loan will cover the huge costs associated with the repair, purchase of products or ordering professional services. If the borrower has no savings, an installment loan will make it possible to take the necessary amount of money, and then slowly repay the debt over time.
The main objectives of such consumer cash lending are:
- Buying cars without participating in the car loan procedure.
- Additional financing for the purchase of real estate without using a mortgage agreement.
- Vehicle Maintenance.
- Overhaul of real estate.
- Payment for medical services.
- Tuition payment.
- The acquisition of household and other equipment bypassing a credit transaction with the store.
- Buying exclusive products that are not sold through ordinary consumer credits.
The essence of the considered form of borrowing is to obtain the amount of money that can be spent on the purchase of specific goods and services. Payday installment loans usually adapt to financial needs, allowing the borrower to get enough free time to pay off the debt. These credits have to be repaid in the form of mandatory monthly payments, so the loan repayment schedule must be calculated in such a way as to keep the borrower’s solvency in good condition.
Main Advantages Of Such Programs
The benefits of such consumer lending programs include:
- The size and volume of the credit is adapted to meet the needs and financial goals of the borrower.
- The duration of the loan agreement can reach 10-15 years.
- The use of funds as you need without determining the precise goal.
- The ability to purchase goods at a reduced price.
Basically, any loan that lasts longer than 12 months can be called an installment one. Not all such forms of financing have the same conditions for obtaining. In some cases, lenders insist on providing official guarantees by the borrower. For example, a client will have to provide a security deposit or attract a guarantor.
Such online installment loans are valued at the most favorable terms for repayment of the debt, but lenders may charge higher fees. Starting the lending process, the borrower is strongly advised to familiarize himself with the terms of the future transaction in order to reduce the risk of overpayment.
Stages Of Obtaining Best Installment Loans
Installment cash loans are recommended to be issued as part of a secured credit system. This is due to the fact that the lender will select the interest rate and maturity of the loan, taking into account the guarantees that the borrower can offer the financial institution. Attracting collateral or a guarantor will make consumer lending an extremely beneficial solution from an economic point of view.
Features of an ideal borrower:
- Age of 25-35 years. Although loans are granted to adult clients under the age of 75, lenders offer long-term loans only to able-bodied borrowers.
- The presence of stable earnings. A statement of income or an extract from a bank deposit account will have to be provided in any case. A potential client must work for at least three years in the position indicated in the certificate. Some lenders shorten this period to six months.
- Excellent credit history and high credit rating. Such parameters indicate that the borrower faithfully fulfills the conditions of previous transactions.
- Lack of collateral debt except for credit cards.
The size of the monthly payment may vary, taking into account the parameters of the client’s income. For example, for seasonal workers, a schedule is more advantageous when large payments will be made at the time of receiving the main income, while a minimum amount can be paid during the quiet season. The regular payment schedule should be discussed with the loan manager. An experienced specialist will draw up an impeccable debt repayment plan that reduces the payment burden on the client.
It is much more difficult to get an online installment loans instant approval than short-term loans. This is due to the need to process information to calculate the level of solvency of the client, so lenders offer a clear sequence for processing the transaction.
Stages of consumer lending are:
- Studying and coordination of co-operational conditions.
- Collection and submission of documents.
- Scoring – calculation of the client’s solvency level.
- Discussion of loan guarantee conditions.
- The conclusion of a pledge agreement or the engagement of a surety.
- Transaction insurance (usually applied for loans over 12 months).
- The provision of cash.
The advantages of the installment loans near me are the transaction conditions that are most beneficial for the borrower. In the process of agreeing on the parameters of the contract, it is strongly recommended that you consult with the manager of the financial institution regarding hidden charges. Many lenders are not averse to inflating transaction fees or to impose several optional services on the borrower.