The term personal installment loan is not difficult to unpack—in fact, early on in your professional career, you should already know about what personal installment loans entail, and whether or not you’ll want to register for one in the near future.
As a general definition, installment loans are loans that are repaid to a creditor over a set period of time, and with a set number of scheduled payments for the principal and the interest. We associate installment loans with their most popular consumer forms—for example, mortgages or car loans that are paid back monthly. However, loan products like a personal installment loan can be used for a variety of purposes and not just strictly for financing a home or a vehicle.
Personal installments may also either be secured—which means it is tied to collateral such as real property or some other asset—or unsecured—which means the loan can be approved even if no collateral is pledged. Usually, with unsecured loans, the financial institution issuing the loan will first determine a borrower’s qualifications based on their credit history or their creditworthiness.
It also follows in most cases that the interest rates for secured loans are relatively lower than those of unsecured loans. Interest rate percentages depend on the bank’s rates, as well as factors like one’s personal credit history.
The key advantage of having a personal installment loan is the allowance to borrow large amounts of cash quickly, then you can pay it back gradually. Personal installment loans are a great compliment, or a great alternative, to open-ended credit mechanisms such as credit cards, since with the latter, you risk being confronted with large bills to pay upfront if you are not diligent about your monthly budget and cash flow.
So, is it the right time for you to sign up for a personal installment loan? What good signs point you toward getting a personal installment loan with your bank? Here are four indicators we feel you should consider. Also, check out the top five sites for guaranteed loan approval.
Getting a personal installment loan aligns with your current financial goals
First off, you should ask yourself why you intend to borrow the money, and what you will be using the money for. It is good to compile a list of expenses that the borrowed cash will be spent on, such as medical or schooling bills. That way, you will have something concrete to tie to your practical decisions about your cash flow. You should also ask yourself if you can afford a personal loan given your monthly salary and expenses. A good rule of thumb on this is: only borrow if you know you can payback!
You have a good credit rating
Banks will only issue you a personal installment loan in good faith if they don’t consider your risk, and if they can trust you to pay back the loan in a timely manner. This goes back to your personal circumstances: Do you have a good credit history? Did you repay your credit card bill timely and maintain good records with creditors? Do you have enough credit records for banks to judge your creditworthiness?
You aren’t balking at the current interest rates.
If the interest rates offered by your partner financial institution don’t make you sweat, then it’s a good time to get in touch. Research what the interest rates will be like per loan amount and per loan tenor, or the length of time until the loan must be fully repaid. Take note also that the interest rates will differ based on whether you will opt for a secured or an unsecured loan. In other words, know exactly what your program will require with regard to the loan’s interest.
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You and your lending partner can get off on the right foot
Lastly, a great indicator that it’s time to get a personal installment loan is if you’ve found the perfect lending partner—a bank or financial institution that offers a wide variety of options for loan amounts in its loan program, and even additional perks like cash coupons. In turn, see what you yourself can do to preserve the good faith of your lender, for example, being diligent in paying your monthly payments
Borrowing need not be intimidating—in fact, the act of borrowing can be healthy for your financial plans and guarantee a fixed measure of stability in your personal life. And so, if the opportunity to explore a personal installment loan presents itself at the right time—take it and open yourself up to new ways of managing your finances!