Installment Loans Work
“For millions of American families, living paycheck to paycheck is nothing new and accessing credit or bank loans isn’t a real option. This means that when it comes to borrowing money, many consumers have limited choices. This problem is exacerbated as lenders face increased scrutiny from federal regulators who are lumping installment lenders in with payday or title loan lenders.
For more than a century, installment lending has proven to be the most affordable and responsible form of consumer credit for working Americans. Before the Internet, the local branch of an installment lender was often the only access to credit for many Americans. They are community-based lenders in cities and towns nationwide. Compared to other forms of small dollar credit, installment loans are the best way for consumers to manage credit and build a positive payment history with the credit bureaus.” Learn More
Installment Loans Can Help Avoid Payday Loan Debt Trap
“Millions of Americans live paycheck to paycheck and aren’t prepared to handle large surprise expenses. A 2012 study from the Financial Industry Regulatory Authority found that 40% of Americans would find it difficult to pull together $2,000 within 30 days to handle an emergency and would have limited options from a credit perspective.
If you find yourself in a financial crisis, remember that some short-term loan options are safer than others. The wrong choice could wind up costing you hundreds of dollars over the course of a loan. Nerd Wallet took a look at the different credit options available to consumers and came to one conclusion – traditional installment loans are the preferred alternative. According to the post, ‘traditional installment loans are the best alternative to payday loans for consumers because they provide consumers a clear roadmap out of debt through manageable equal monthly payments that pay off both principal and interest.’” Learn More
Traditional Installment Loans Can Help Your Credit Score
“Sometimes, bad credit happens. If you find yourself in a situation with a weak FICO score (FICO scores are used to determine credit worthiness in 90 percent of loan decisions), you might consider strengthening your creditworthiness by taking out a small installment loan – one with a pre-determined interest rate and length of repayment – to demonstrate credit worthiness. You can not only use the loan for a major expense, but since you will repay it according to the length and terms negotiated with the lender, your credit score will improve once the loan is repaid.
According to a recent article in Money.com, a “credit builder” loan such as an installment loan could demonstrate an improvement in your FICO score in as little as a few months, when repayments are made on schedule. In fact, an installment loan may be a better option to rebuild credit than trying to open up a credit card which may carry very high (or even variable) interest rates – creating both an additional financial burden and unpredictability. They are also better than getting a payday loan for this purpose because traditional installment loan lenders report payment history to credit bureaus whereas payday lenders do not.” Learn More
When Should I get an Installment Loan?
Sure, you can use the money from a personal loan to cover expensive car repairs or a medical bill, but that’s not all. Family vacations, back to school shopping, and home improvements are all great reasons to take out an installment loan.
If you have questions about installment loans, you should talk to a qualified lender - they'll be happy to help you make the right decision.
We’d like to thank AFSA, the American Financial Services Association, for providing the content in this blog. Additional information is available at InstallmentLoansWork.com.