Do you need money for a purchase and have to borrow it? If so, you may be wondering what type of loan you should get. There are installment loans and revolving loans, with both types having their own advantages and disadvantages. Here is what you need to know about both types of loans before you decide on the one that is best for you.
One of the nice things about installment loans is that they have a predetermined end date. There is a goal of when the loan will be paid off, and you'll know exactly how much you'll pay in interest over the length of the loan. Many people like having the predictable payment that they can budget for overtime.
A lender can even provide you with an amortization schedule for the loan, which states how much of each payment goes towards the principal and interest. Since those early installment loan payments are made up of more interest than principal, it will help to know when you start making progress towards paying off the money that you borrow.
An installment loan approves you for a large sum of money that is provided at the start of the loan. If you need more money, you'll need to apply for a second type of loan. However, the interest rate on this type of loan is often cheaper than a revolving loan, which makes it more affordable even if you start paying interest on the full loan amount in the first month.
A revolving loan is much like a credit card or a line of credit. What makes it unique is that you have a set amount of money that you can borrow, and you can continue to borrow within your loan limit as long as you do not go over that limit.
Revolving loans do not have an end date where the loan will be paid off, and it makes the monthly payments very unpredictable. The amount that you owe can sometimes be based on how much money is left to pay off on the revolving loan, with you owing a percentage of that balance each month. This means your payment can change from month to month.
The advantage of a revolving loan is that you can request more money if you need it since that is the whole purpose of having this type of loan. You may have a low balance to start, but know that you'll need more money later on. This is true if you are using the money for home improvements, and will gradually need to borrow money over time.
Contact a loan service to learn more about personal installment loans.
When was the last time you realized you were in the red financially? Although most people don't think about their finances on a day to day basis, it can be easy to find yourself living paycheck to paycheck if you aren't careful. I began thinking carefully about the financial implications of some life decisions I was making, and I knew I had to make a difference. I talked with a loan officer about getting things together, and he was instrumental in helping me to work things out. Read more about my financial successes and failures on this little website. You might be able to avoid some of my previous mistakes.