An instalment loan is money that is borrowed at one time. This amount is repayable in fixed amounts payable monthly – known as instalments. These amounts may be fixed or variable payments.
You need to know exactly how much you need before you borrow monthly.
Types of instalment loans:
- Vehicle Loans
- Personal Loans
This debt can be paid off by a specific date.
These loans are typically more long-term, which means they are repayable over a period of 12 months or more.
One of the disadvantages of applying for instalment loans is that you cannot borrow more. The longer the loan term, the more you will be liable for paying too, so it’s vital to take this into account before applying. This amount also includes fees that may lead to a much higher loan amount in addition to added interest.
The interest rate and loan terms are based on your credit status. If you have a poor credit score then you are more likely to get a loan with a higher interest rate. This ultimately means that instalment loans are going to result in paying more over a long-term period.
It’s vital to understand the terms and conditions of the loan before you apply.
Where to apply for instalment loans:
- Financial institutions
- Online lenders
Criteria for application process:
Lenders generally require applicants to fulfil specific criteria, such as having adequate paperwork. Credit scores are also generally required to be high, which results in favourable decisions in terms of approval.
What happens if you can’t repay instalment loans?
A comprehensive analysis of instalment loans involves understanding the repercussions of defaulting on payments. Depending on the terms of the loan agreement, as well as the loan type, borrowers may deal with negative credit scores or assets that are repossessed by the lender.