There must be an appropriate financial need for which you will be applying for loan. Various types of personal loans are offered for different purposes, such as auto loan for car, mortgage or home equity loan for homes, student loans for college funds, small business loans for business finances, debt consolidation loans, line of credit, cash advance, payday loans, installment loans, peer to peer loans and many others.
The advantages of installment loans make them more appealing to consumers than other loans. In installment loan, money borrowed to be paid back within a contracted period of time in monthly payments on regular basis.
The personal loan lenders do not require a lot of documentation and can easily approve online within a numbers of working days. The processing time is quick and you can get cash easily.
Personal loans are multipurpose and can be used for any need or emergency. They are unsecured loan and no need of security makes it less risky for borrower. This is a good choice for consumers who have nothing valuable for security.
Installment loans come with fixed interest rates till the whole loan paid off. It becomes easy for a borrower to manage loan amount with interest within his budget and need not worry about increasing interest rates.
Installment loan generally take long time to finish the loan. For example, if it took 15 to 18 years, every month the loan amount will be low and easy for borrower to pay off. Installment loan has predetermined end dates and borrower knows when it finishes for good.
There are some disadvantages of installment loan, despite the attractiveness of its various benefits.
For unsecured personal loan the borrower should have good credit score to qualify for loan, otherwise the lender will charge high interest rate. So be regular on paying off loan to maintain high credit score or your loan application will be rejected. Consumers having bad credit are not approved for bigger loans and they are imposed with strict repayment terms.
In the absence of collateral, unsecured loan is high risk for the lender. If a person defaults, the recovery of loan amount becomes hard and expensive for the lender.
If you have assets like home, car, gold or other valuable things, you should apply for secured loan as it will require low interest rate even with bad credit and you can get maximum loan amount. But it is important that you take into account your monthly income, other current loans, monthly bills and miscellaneous expenses. You must make plan how to pay back loan regularly on due time, otherwise you may end up in legal trouble.
The installment loan lenders do not allow you to prepay off your installments. You will have to pay off your loan with interest for the entire tenure of loan which is quite expensive.
Personal loans offer cheaper rates than credit cards, with good credit score. But on the other hand, with low credit, interest rates will be higher.