Imagine a situation, you have been dreaming of a new car for many years. You drive it and catch the admiring glances of men or the envious glances of other women. It is beautiful, shiny and very expensive. With your salary, this dream will remain a dream.
But, passing the shop windows of the car salon, you see a tempting inscription: “Buy without overpayment and down payment”. It immediately works in your head that installment loans are beneficial. And now, you are the happy owner of a new car.
You can think of a lot of such stories. They have one thing in common – there is an expensive thing or service that you cannot afford, but really want. What to do? In this case, several solutions to the problem are possible:
- To accumulate, deferring a certain amount every month from income, but to postpone the purchase period for an indefinite time.
- Borrow from relatives or friends, but this is not always convenient.
- Take a consumer loan and pay an amount significantly higher than the value of the thing.
- Take the opportunity to pay in installments for several months with a minimum overpayment.
Here, it would seem, a great option at number 4. But first of all, let’s look at what installment loans are, how they work and what’s the catch.
What To Know About Installment Loans?
Best installment loans are a definition applicable to classic loan products, which means the gradual repayment of debt over the period specified by the terms of the agreement. An alternative to this method of fulfilling credit obligations is the procedure for repaying the entire loan amount before the date specified in the contract.
Steps In Obtaining An Installment Loan And The requirements Applied
The requirements for payday installment loans differ little from other types of credits:
- age (22-50 years usually);
- certificates from the place of work (income, seniority, etc.);
- positive or net credit history (banks often refuse to customers with a tarnished reputation);
- citizenship and permanent registration in the region where there is a bank branch;
- other requirements related to the type of loan, depending on the lender.
In the overwhelming majority of cases, online installment loans refer to secured credits. Often, by agreement, they are issued as a rollover, i.e. with a floating interest rate. The essence of such a credit is simple – a loan is issued, the interest rate is agreed. At the end of the year, the interest rate is revised, and may both rise and fall, depending on market fluctuations. For the borrower, the benefit is obvious – the absence of overpayment (often, lenders are re-insured and add one or more percent, so that in the event of a negative market change gain their profit). It is also convenient for the lender – he will receive a stable income, without strong fluctuations. And he will not be “in the cold” in case of the growing demand for loans.
Why Apply For Installment Loans?
The most popular personal long-term loans are:
- mortgage – for the purchase of housing with its registration as collateral. It is issued for a period of up to 30 years;
- car loan with a pledge of the purchased car provided for up to 10 years;
- improper consumer credit for various needs.
You can also allocate long-term loans to enterprises, interbank and international loans.
Benefits Of Installment Loans
The advantages of such installment loans near me are obvious: you can purchase real estate, cars, equipment immediately, and you do not need to save up for it for many years.
Sometimes an application for such a loan has its advantages. Traditionally, they are issued to those who need to receive a huge amount of funds. Stretching the term allows you to claim decent money since it is unprofitable for banks to issue large loans for a short term. The percentage should be calculated taking into account the client’s income.
According to experts in the field of financial lending, it would be preferable to calculate interest, so that they would occupy no more than a quarter of the borrower’s income. And here we are talking about officially declared income. However, this is not considered a strict rule. If you are a regular customer of this bank, your credit history is clean and not in doubt, you can confidently count on a percentage that will become half of your monthly income.
How To Repay Installment Loans?
Installment loan standard conditions provide for partial repayment in monthly installments, which minimize the burden on the borrower’s budget. The practice is widely used in issuing consumer loans in cash, mortgages, and other products.
Depending on the procedure for repayment of loan obligations, financial institutions apply annuity and differentiated periodic payments. The structure of annuity payments is based on the predominant repayment of accrued interest and a small share of the main debt. During the term of the contract, there is a decrease in the share of the payment intended to pay interest and an increase in the amount allocated to write off the loan body.
A differentiated payment is formed by part of the main debt and accrued interest, the calculation of the amount of which is carried out taking into account the size of the active debt. This method is characterized by higher monthly payments in the initial period of fulfillment of obligations, which are significantly reduced over the duration of the contract.
In conclusion, we would like to note that the installment loans are only gaining momentum. Their number, the ratio of the country’s population is increasing by leaps and bounds. People are increasingly buying real estate, cars, and even large household appliances and other goods on credit. The main advantage, undoubtedly, is the ability to use “your” transport, apartment, appliances, furniture, without saving for many years. More precisely, almost always, it is necessary to accumulate a certain amount (10-50%), called the down payment, which guarantees that you will get an online installment loan’s instant approval and the debtor does not refuse the purchase.