An instalment loan is just like any other loan – you borrow a sum of money that is repaid with interest added on top of the initial loan value, but you pay this loan back over a certain time period at certain intervals (typically monthly). Your payments or installments won’t fluctuate and will be made up of both the original amount and interest. It’s a common misconception that instalment loans are only for borrowers with bad credit, in fact, they are for everyone
Know your credit score
This step should be the first step before taking out any loans or credit, as it will give you a good overall view of your financial history. Knowing how the system works is the best way to boost your score, allowing you a better chance of being accepted for that loan or financial service.
Your credit score has a significant impact on both the interest rate that you will pay on a loan and the amount you will be able to borrow. If you have a low score and your situation allows you to increase your score, do so before applying for a loan. If it doesn’t, then be realistic, a poor credit score will show lenders that you are a higher risk for them and, therefore, might charge you a higher interest rate and a low limit.
Choose the right loan for you
In choosing the best loan for you, there are a number of factors that should be taken into consideration, including the loan term, interest rate (APR) and your borrowing limits. By answering these questions, you can determine the kind of loan that works best for your financial circumstances. For larger loan amounts or a longer repayment period, an instalment loan may be more suitable for you. Everyone’s needs and situations are different and, therefore, you needs will be different to anyone else’s. You maybe taking out a loan for a variety of reasons including completing a home improvement project, covering educational expenses or even making a major purchase.
It is vital to ensure that you would be able to afford the repayments that you will be signing up for. Otherwise, you risk being hit with penalty charges, not to mention damaging your credit score and reducing your chances of being accepted and offered other money-related services in the future.
Compare, Compare, Compare
Once you have chosen what type of loan you require, it’s time to shop around for the lowest interest rate is the best way to ensure that you get the best deal. While it makes sense to start with banks and credit unions because they will likely have the most favourable rates, you shouldn’t necessarily limit your search to just them.
Check your Lender’s Requirements
Review the lender’s rates and terms on their website, gather as much information as you can regarding their credit history requirements and determine their policy regarding credit checks. If you still have questions, contact the lender directly and talk to a representative. it is also a good idea to check their terms and conditions so you are fully aware of what you getting yourself into.
Determine a reasonable payment amount & schedule
Once you are satisfied with the lender you want to borrow from and before you apply for an instalment loan, you need to decide on a repayment amount and schedule. Your lender will ask this of you anyway, but it’s better to have your finances in check before you apply. Creating a budget will help you work out what how much extra you’ll have each month to commit to repaying if you take out a loan. Which is why it is so important to assess your finances before clicking that apply button.
Taking out a loan does not have to be stressful or complex once you break the process down. Always remember to borrow what you can afford to pay back and with smart decision-making, borrowing money can be simple to understand.