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Different Types of Installment Loans

Installment loans are loans where the borrower repays the amount he or she receives in equal amounts throughout the life of the loan. Largely considered safer than payday loans, installment loans have recently grown in popularity among consumers because of their lower monthly payment options.

What many people don’t realize is that installment loans have been around for quite a while.. Have you ever taken out a car loan, student loan, or mortgage? If yes, then you already know a little bit about installment loans.

Car Loans

When you need a car but don’t have the ability to pay all cash, car loans are what can get you out on the street. Just like any other installment loan, car loans are fixed, so you know exactly what you owe each month. Plan accordingly, and don’t buy anything beyond your means. The dangerous thing about taking out a car loan is that if you don’t make your payments, the car could very likely be repossessed.

Mortgages

Mortgages are also a type of installment loan, and are taken when you would like to purchase a house but don’t have the money to buy it out right. Whether it’s a 15 year or 30 year loan, mortgage loans come in all sorts of packages with varying interest rates. As with car loans, if you don’t make your payments, the bank can foreclose your house.

Student Loans

With student loans, your receive a set amount while you are actively enrolled in school. When you graduate and the grace period ends, you start making payments. Like mortgages, there are many types of student loans out there. Sometimes interest is fixed, and sometimes it’s not. If for any reason you are unable to make a payment, contact your lender. They may give you the option to go into deferment. Be careful, though: with many loan packages, interest still accrues during this time, so once your deferment period ends, your monthly payments may be larger than they were before.

Unsecured Loans

Unsecured loans are granted to people with decent credit and don’t involve any collateral that may be possessed should the borrower fail to make payments. The loans are usually a lot smaller than other types of loans, but, as a consequence, have a higher interest. These types of loans are good for when you only need money for a short period of time. Because of the higher interest, you’ll pay back more than you borrowed, but monthly payments will still likely be more manageable than payday loans.

Writer

Lauren Ward is a widely featured author with her work gaining a presence on top media outlets like Huffington Post, Kiplinger, and CBS News. She has been in the content writing business for almost a decade (9 years of experience and counting) and writes attention-grabbing content focusing on real estate, lending, and personal finance. She has worked with various national non-profit organizations and at Federal Reserve Bank of Richmond. Read more >

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