We’re sure you’ll agree with us – borrowing money sucks. However, that has changed radically since the advent of the internet. Gone is the hassle of having to join long queues at the bank to fill out tiresome long forms or the embarrassing ordeal of borrowing money from family and friends. At the click of a button, you can now easily access various types of loans offered by a myriad of online money lenders. However, which type of loan is suitable for your needs? An online installment loan is a common type of loan offered by banks, installment loan lenders, and other lending institutions. To determine whether an installment loan is for you, let’s take a broad look at some of its features, advantages, and things to look out for when borrowing online.
As its name implies, an installment loan is one which allows you to borrow a fixed amount upfront and repay on a fixed schedule throughout the loan tenure – in bite-sized and manageable amounts. These fixed features introduce predictability – an element which you’d learn to appreciate. As you know exactly the amount you’re expected to repay monthly, you can exercise better control over your monthly budget. Online installment loans are likely to benefit people with a financial emergency or a very lucrative investment or business opportunity but couldn’t secure a bank loan. When you can get the money to achieve what you want in life without having to worry about a humongous lump sum repayment, installment loans seem like a perennial crowd-pleaser. However, there’s a catch.
Interest rate stays constant
Generally, these loans have fixed interest rate repayments. This means that the interest rate stays constant throughout the loan tenure and the borrower repays the same amount every month until the loan is fully paid up. As the interest rate stays constant whatever the market conditions, fixed-rate installment loans tend to have a higher rate than variable interest rate installment loans.
A variable interest rate loan is one which your monthly repayment amount will change whenever its interest rate fluctuates. The initial interest rate for variable rate loans is usually slightly lower than that of their fixed rate counterparts. Due to the lower initial monthly repayments, borrowers of a variable rate loan often qualify for a higher loan amount. However, its interest rate will be adjusted periodically to reflect economic situations. So if rates fall, the variable interest rate of an installment loan normally drops. If rates increase, the variable interest rate will follow suit. It’s important for you to consider the pros and cons of these different types of installment loans before committing to one. So what are the added advantages of taking out monthly payment loans online?
1. Fast set-up
All you need to do is fill out a short application form at a reliable online lender website and your loan could be approved in a matter of a few days or even within 24 hours. When your loan is approved, the online lender will deposit the loan amount into your bank account. This means you can conveniently withdraw the much-needed cash at an ATM anytime.
2. No credit history checks
Why are online lenders able to approve loan applications so swiftly? That’s because they don’t usually check the borrower’s credit history. A bank loan application has a longer approval time as the bank will conduct checks on the borrower’s credit history. If you have a checkered credit past, it’s likely that your loan application will be rejected by the bank. If you’re in urgent need of cash, there’s no time to lose in waiting for your loan application to be approved, if it gets approved at all.
3. 24/7 convenience
You have the luxury of applying for installment loans online anytime, anywhere. No more having to join the long bank queues or take time off from work just to be at the bank during their opening hours to settle your loan application. In spite of the many advantages of applying for an installment loan online, we can’t emphasize the importance of exercising caution enough.
When it comes to financial matters, especially when applying for online installment loans, it pays to take extra precaution. You want to be able to secure your loan quickly, not lose sleep over it.
1. Personal information is protected
Credible online lending websites have reliable security systems in place so that your personal information which you shared when filling out the application form and your transactions with the company wouldn’t be stolen or shared. Their URLs usually start with a “https” which means these sites have been developed for secure online transactions as a priority.
2. Customer service team with real human consultants
Legitimate online lenders have a stellar customer care team whom you can call and speak to a human customer care consultant. Beware of online lenders who only have an automated phone system.
3. Ask about the APR (annual percentage rate)
An ARP is the exact interest rate which you’ll be paying annually. It’s the fee of the online lender plus annual interest charges. Sometimes, an online lender may charge a lower interest rate but include high fees while others do the opposite. Hence, when you’re given a periodic interest rate, that doesn’t reflect the real cost of financing the online installment loan. An ARP offers a more accurate reflection.
4. Repay on time
Only borrow the amount you’re confident of making timely monthly repayments for. Not only are online installment loans expensive to borrow, if you default repayments regularly and should the online lender report it to the credit bureaus, your credit score could take a bad hit. You could also be slapped with hefty late-payment fees. The last thing you want to do is take out a payday loan to settle your monthly repayments for the installment loan. Indebtedness is a bottomless pit.