There are various types of loans available in the market. All the loans usually fall into two categories—one is an installment loan and the other is a revolving line of credit. Read on to know everything about installment loans.
What is an installment loan?
An installment loan is where you borrow a certain amount from the lender and you pay the amount and the interest over the tenure of the loan in the form of equal monthly payments. In order to determine whether you qualify for a loan, the lender will look at your credit score and your income to determine your ability to repay the loan. You might have to answer a few questions about your current employment status which will help the lender determine your financial health.
How do you get an installment loan?
The credit score is a crucial aspect for any loan application process. You need to keep a check on your credit score for a few months before you apply for an installment loan. You might have to take a few steps to improve the credit score if it is not up to the mark. Lenders will also take a look at the debt to income ratio you have. If you have a large amount of outstanding debt, you might want to pay it off before you apply for a fresh loan.
Where can you apply for an installment loan?
It is ideal to begin shopping for a loan at your local bank or at the credit union where you already have an account or an established relationship with the lender. If you have a saving or a checking account with a particular bank, you may apply for the installment loan at the same bank in order to make the most of the discounts offered by them.
There are numerous online lenders who offer a loan, but it is important to be very careful when choosing a lender you want to borrow from. Compare the interest rates of different lenders and ensure that you get the best deal for your loan. Choose a reliable lender who has catered to a number of borrowers in the past and has a low rate of interest. Always read the fine print of the installment loan agreement carefully so that you are aware of the cost and the interest associated with the same. It is important to have all your questions answered by the lender before you sign on the agreement.