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Installment loans can prove to be a useful tool in times of need. They are better than credit cards, with some of them available at low interest rates.
An installment loan is an agreement in which a loan is repaid over time through periodic payments. They are safer and more economical than payday loans and open-ended credit like credit cards. Read on as we dig deeper into installment loans and its types.
What is an Installment loan?
An installment loan is a type of loan used to finance a vehicle, property, or university degree. Borrowers obtain a lump sum amount after their application is accepted by a lender. They then pay back the loan over a set term in EMI installments.
Unlike the latter, where borrowers have access to revolving credit, installment loans offer a single lump sum amount. With credit cards, borrowers can borrow money again. However, the credit line is closed when borrowers pay off an installment loan.
Types of Installment loans
There are many kinds of installments loans, but the two main categories are secured and unsecured installment loans. In secured installment loans, borrowers must pledge their security to get the loan amount. The security for a mortgage loan is the property you buy through the loan, while the security for a car loan is the car you are buying with the loan. Non-payment of dues can lead to the loss of these securities.
Unsecured installment loans, meanwhile, do not require collateral. Lenders simply evaluate borrowers' credit score and their capacity to settle debt before processing personal loan applications. That said, the personal loan interest rate applicable on an unsecured loan is typically higher than the rate charged on a secured loan.
Here are some of the common types of secured and unsecured installment loans:
Personal loans
These EMI installment loans can be utilised for many things, including debt reduction, medical bills, home improvement, and weddings. You can easily get a personal loan from banks and Non-Banking Financial Companies (NBFCs). Many institutions, such as Metra Trust, offer personal loans online. You can visit the bank’s mobile banking app, register yourself, and then apply for a instant personal loan. You can get a personal loan of any amount you need, although the interest rate will be high.
While installment loans may have similarities with credit cards, they could not be more different.
Auto loans
Auto loans are used to finance a vehicle. However, you can lose your car if you fail to repay your loan amount, as the car is the loan security. Auto loans often have lower interest rates than unsecured loans.
Home loans
Home loans are a type of secured EMI installment loan used to buy a house. Your property is used as security to safeguard the lender, which helps reduce the mortgage interest rates. However, if you cannot meet your loan commitments, you may lose your house.
Student loans
Lenders might grant installment loans to help pay for higher education. The interest rate, repayment period, and installment amount depends on many factors, including credit score.
An installment loan might assist you in financing a car or a property. However, like any other product, it has benefits but drawbacks as well. Flexible terms and reduced interest rates are useful for borrowers, but the possibility of default can be a problem. Hence, conduct a thorough reach before getting an installment loan. Browse and compare rates and terms given by different lenders before making a choice.
You can consider Metra Trust for installment loans. With features such as online installment loans and affordable interest rates, Metra Trust could be the best choice for an installment loan.
Disclaimer
The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Metra Trust or its affiliates to any licensing or registration requirements. Metra Trust shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.