When someone needs money and is looking for a loan, they often don’t consider the type of loan they need, but rather what they will use it for.
This means they may not always consider which type of loan is best for them, which could lead them to loan that isn’t ideal for their situation (like payday loans or other high-interest credit products).
In this post, we will look at various types of installment loans and the things they can be used for.
But first, let’s cover the basics.
What are the major types of credit you can apply for?
There are three types of credit you can apply for:
Installment Loans
Installment loans are paid back in fixed, monthly payments over a set period of time. The most common examples of installment loans are mortgages, auto loans, and personal loans.
Revolving Credit
Revolving credit is credit that can be used repeatedly up to a certain limit. The most common type of revolving credit is a credit card, but it also includes things like home equity loans.
Open Credit
Open credit is a type of credit that doesn’t have a set repayment schedule. Utility bills are a common type of open credit, where you pay by use every month. This arrangement is common, but it is also why you may need to pass a credit check before opening your account.
Where can I get an installment loan?
Installment loans are available from various lenders, including banks, credit unions, private lenders, and online lenders.
Each type of lender will have its own rules and criteria for deciding whether to loan you the funds you need.
At SkyCap Financial, we specialize in offering installment loans to many different types of borrowers, including those with bad credit. If you need a loan, check out our application page to get your loan started.
How do I qualify for an installment loan?
You typically need to meet the following qualifications to get an installment loan:
Age
You will typically need to be the age of majority where you live to take out an installment loan.
Income
You will need a regular income source to qualify for most installment loans. This can come from employment, contract work, pension, or other sources.
Debt-to-Income Ratio
Your debt-to-income ratio measures how much debt you have relative to your income. Most lenders want a DTI ratio of 43% or less to qualify you for a loan.
Credit Score
Your credit score is a measure of your creditworthiness and is used by lenders to determine your loan and interest rate. The major credit bureaus maintain this score and assist lenders in evaluating each borrower’s creditworthiness.
Generally, the higher your credit score, the better your chances of getting an installment loan. However, at SkyCap, we will work with all types of credit scores to make sure you get the money you need when you need it.
What are the benefits of an installment loan?
There are several benefits to taking out an installment loan:
Fixed monthly payment
Installment loans typically have better repayment terms than other types of loans. They often have regular, fixed payments, making budgeting and forecasting easier. It also makes it less likely that you will default on the loan if you are forced to make regularly scheduled payments.
Builds Credit / Improves Credit Score
Making regular payments on an installment loan can help build both your payment history and your credit score. This improved credit report will help ensure that you qualify for better terms and interest rates in the future if you ever need another loan.
Fixed Interest Rates
The interest rate on an installment loan is typically fixed, which means it won’t fluctuate over the life of the loan like it might with a revolving line of credit.
What should you look out for with installment loans?
The interest rate is the main thing to look out for with installment loans. Make sure you understand the interest rate before you agree to take out the loan.
You should also make sure you know how long you have to pay back the loan and any fees or penalties that may come with it. It’s essential to read the fine print, so there are no surprises down the road regarding your monthly installments.
Now that you know a little more about installment loans, let’s take a look at some examples of installment loans:
7 Common Examples Of Installment Loans
There are many different types of installment loans that you can take out. Here are seven common examples of installment loans:
1. Auto Loan (aka. Car Loan)
Car loans are one of the most common types of installment loans. Auto loans are typically used to finance the purchase of a new or used vehicle. The terms of an auto loan will vary depending on the lender, but most auto loans have a term of 36 to 60 months.
2. Home Loan (Mortgage)
Another common type of installment loan is a home loan, which is used to finance the purchase of a home. Mortgage loans can be either fixed-rate or adjustable-rate and are typically repaid over a period of 15 to 30 years.
3. Student Loan
Student loans are another type of installment loan. Student loans are typically used to finance the cost of tuition and other expenses associated with attending college or university. Student loans usually have a term of 10 to 20 years.
4. Personal Loan
Personal loans can be used for various purposes, such as consolidating debt, financing a home improvement project, or paying for unexpected expenses. Personal loans typically have a term of 36 to 60 months.
5. Business Loan
Business loans are a type of installment loan that can be used to finance the start-up or expansion of a business. Business loans typically have a term of 5 to 10 years and often require some form of collateral from the borrower.
6. Buy Now, Pay Later Loan
Buy now, pay later loans allow the borrower to make purchases and then pay for them over time. These types of loans are typically offered by retailers and can have a term of 6 to 24 months.
7. Secured Loan
Secured loans are another type of installment loan that uses collateral to secure the loan.
Collateral is an asset, such as a car or home, that can be used to repay the loan if the borrower defaults on the loan. Secured loans typically have lower interest rates than unsecured personal loans but may require the borrower to put up collateral to secure the loan.
Conclusion
Installment loans are a type of loan in which you borrow money that is repaid over time with a fixed number of scheduled payments. These loans are popular with borrowers as the equal monthly payments and fixed interest rates can improve their personal financial situation.
If you need a loan and want a quick way to get started, we can help. SkyCap works with all types of borrowers, regardless of credit history. Check out our online application and get started today!
