Budget-friendly borrowing: How installment loans can help when money is tight
Nearly one-third of British workers report living paycheck to paycheck.
Does this sound familiar to you? Would one emergency totally derail your finances and leave you without enough money to pay your bills and care for your family?
If you're in the middle of a financial emergency right now, or if you just want to be prepared should one occur, taking out an installment loan is one of the best options for you to consider.
Read on to learn more about the benefits of taking out installment loans to help you through difficult financial times.
What are Installment Loans?
An installment loan is a type of personal loan that you can take out from a bank, credit union, or online lender.
This type of loan gives you access to a lump sum of money as soon as you're approved. Then, you pay back that money (plus interest) in monthly installments for a set period of time.
Installment loans are very common and can be used to a variety of purchases. Most lenders put very few (if any) limits on how you can use them.
Benefits of Installment Loans
There are lots of reasons why you might want to consider taking out this type of loan. The following are some of the greatest benefits they have to offer:
Predictable Monthly Payments
In most cases, these loans come with a fixed interest rate. This means that you'll pay the same amount of money in interest (on top of your loan payment) each month.
This makes it easier for you to work your monthly loan payment into your budget. You'll be able to trust that it'll always be for the same amount, no matter what.
Low Monthly Payments
Many loans come with the option for long loan terms. Choosing this option allows you to enjoy lower monthly payments.
If you've been wary of taking out a loan because you're not confident in your ability to pay it back, knowing that a longer loan term with lower payments is an option might change your mind.
Fast Approval
Often, you can get approved for an installment loan right away. Many lenders offer same-day loan approval. This is especially true when you're working with online lenders.
As long as you have all the necessary documentation at the ready, you can get approved very quickly and get caught up on your payments in no time at all.
Higher Loan Amounts
These loans come with higher-than-average loan amounts in many cases.
Even if you don't have a great credit score or strong borrowing history, you can still likely get more money from an installment loan than you can from other types of loans.
There's no guarantee how much money will be available to you, of course. More often than not, though, the amount will probably be greater when you choose this route over other loan options.
Improve Your Credit Score
You can also use an installment loan to build credit or improve your credit score. If you're not happy with where your score is right now, taking out a loan and making your payments on time each month will help to bolster it.
This, in turn, will make it easier for you to qualify for larger loans and higher credit limits in the future. It'll also help you with other things like buying a house or car.
How to Apply for a Loan
Are you interested in taking out an installment loan? Are you unsure of how to go about it or how to increase your chances of approval?
Here are some tips to keep in mind as you get ready to apply:
Compare Lenders
It's always a good idea to compare loan rates and terms from various lenders before you choose one.
There are lots of tools online that will allow you to compare lenders and figure out which one will offer you the best loan options. You can use these tools without having to put in much (if any) personal information or have a hard credit check done.
Know Your Credit Score
Be sure to check your credit score, too.
Even if you think you have bad credit, you still ought to take a look at your credit report. You can check to see if there are any errors that are bringing your score down.
This also gives you an idea of where you stand and what kinds of loans you're most likely to get approved for.
Only Ask for What You Need
As a general rule, avoid asking for more money than you need. This is true even if you know or suspect you can qualify for a higher dollar amount.
Asking only for what you need will increase your chances of having your application approved. It'll also make it easier for you to pay back the loan.
Gather Essential Documents
There are lots of documents that you may need to have on hand when applying for a loan. This includes the following:
- A copy of your driver's license
- Bank statements
- Proof of income and/or employment
Make sure you have all of these ready to go when you begin filling out your application. It'll make the process go by much more smoothly.
Limit Your Applications
Finally, limit the number of applications you fill out. If you apply for several loans at once, your credit score will take a hit.
Lenders will see that you're filling out tons of applications, too, and this can make you look like a risk to them. As a result, they may be less inclined to approve your application.
Get the Money You Need Today
As you can see, there are plenty of benefits that come with taking out installment loans when you're in a bind and need some extra money in your bank account.
If you keep these tips for applying for a loan in mind, you'll also increase your chances of approval and may even have access to more funds.
Do you want to learn about other options available to you when money is tight? Check out the Lifestyle section of our site today for some other finance-related resources.
