Monday, 8 April 2019

When it comes to borrowing money, you have a lot of options.

Not just where and how much to borrow, but what type of loan. So how do you know which loan to choose?

With the right information, you can make the right choice for your own individual situation. We've gathered a few of the most frequently asked questions here to help you make that decision, beginning with a personal installment loan.

What's the difference between a personal installment loan and a credit card?

A credit card is a revolving line of credit that lets you reuse available credit as you pay down the balance. You have the option to pay off your credit card at your own pace, paying as little as the minimum monthly payment.

A personal installment loan is a loan with a fixed term and typically a fixed monthly payment amount. You receive the full loan amount at the time your loan is closed, and your payment amount is generally based on the APR and term of your loan.

How can I use a personal installment loan?

You can use the proceeds of your personal installment loan for almost anything, but there are some things that make more sense than others. For example, a personal installment loan is a good fit for a one-time, high-dollar purchase. The fixed term means you know exactly what your monthly payment will be and when your purchase will be paid off.

If you're making smaller purchases, you probably won't want a personal installment loan since you'll get your entire loan amount at one time, and the interest will begin accruing immediately. In that case, a credit card or other revolving loan would be a better option.

Similarly, if you are making a large purchase that can be used to secure your loan -- such as a car or boat -- you would probably be better off getting an auto loan. Because those loans are secured, your interest rate would likely be lower.

How much can I get for a personal installment loan?

A personal installment loan is based almost entirely on your credit. Since it is an unsecured loan -- meaning it's not backed by a car, boat or other item that's being financed -- the credit criteria may be more restrictive than other types of loans.

If you plan to use the funds from your personal installment loan to consolidate and pay off other loans or credit cards, that may also impact your approved loan amount.

How do I repay a personal installment loan?

At the time of your loan closing, you'll receive all the information you need about the amount, timing and duration of your payments. Your term may range from 12 months to six years, which will determine your payment amounts. There is typically no penalty for repaying your personal installment loan early, but you'll want to read the detailed terms of your specific loan to be sure.

Can I reuse my personal installment loan once it's paid off?

No, because a personal installment loan is not a revolving credit product. Instead, you receive the funds from your loan all at one time and pay off the balance in fixed monthly payments. Just like a car loan, you can repay your loan early if you choose, but you cannot reuse the repaid balance.

How do I apply for a personal installment loan?

The application process is usually pretty simple, requiring little more than your personal information and a credit check. Some loans have a very straightforward application and a relatively short wait for funding, in some cases the same day.

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