Understanding Installment Loans for Bad Credit
An installment loan refers to a loan wherein a set of number of scheduled payments are made over time. For instance, Jane needs to borrow $1,000 to pay for an emergency medical expense. Jane can take out an installment loan requiring her to pay the amount back in twenty-four months at a 25% interest rate. In an installment loan, Jane can get a check worth $1,000 and pay regular monthly payment of $53.37 for a period of 24 months. What is the difference between an installment loan from a payday loan? Payday loans have higher interest rates, paid as a single lump sum on the next payday of the borrower, and are consider short-term loans. Installment loans are flexible because the payments can be spread in many months over the term of the loan.
For people who have a poor credit, bad credit, or no credit history, installment loans are the best option to build credit. The reason for this is that installment loans are requiring multiple payments over time, helping create a good history of repayment. A borrower’s payment history is reported to credit reporting companies or agencies, thus helping improve a credit score of borrowers with a good payment history. Installment loans can help Jane establish a good credit history for better business transactions. An installment loan is a good solution for those needing extra funds that beyond cash advance can offer. Installment loans are more flexible than other types of loans because the borrower can decide the amount to be borrowed and the length of time it can be paid back. A borrower can decide on smaller payments for a longer payback period or a shorter loan term with larger payments. Installment loans are not yet available in all states, with some states dictating the maximum and minimum loan amounts that can be borrowed in an installment loan.
In an installment loan, there are associated fees and interest charges, and these fees and charges must be written and explained in the lender’s loan agreement, and notifications must be sent to the borrower if late fees apply if ever the borrower is unable to make payments on time. As required by the U.S. law, the lender should express all charges clearly in dollar amount including the annual percentage rate (APR). Allow Bonsai Finance to help you get an installment loan so you can create a good payment history, most especially if you are dealing with a bad credit or poor credit standing. We wills hed light to the facts and benefits of installment loans.