subject: Installment Loans: The Best Deal [print this page] Installment Loans: The Best Deal Installment Loans: The Best Deal
Installment loans are loans that are paid off in certain amounts of payments over a certain amount of time. For example, a mortgage is a type of installment loan. Another word for an installment loan is a traditional consumer loan. Generally speaking, how an installment loan works is that the faster you pay it off, the more you pay in principle each month, and the less you pay in interest. Because you are paying off more in principle, your monthly (or however often you pay) payments will be higher than if you were taking longer to pay it off, however, you will not be paying as much in interest, you will be paying off more of the actual cost of whatever you got the loan for.
The goal of getting a loan should be getting the best deal possible, which would be getting the lowest interest rate possible. Therefore, it is always wise to pay off your loans as fast as you can. Having good credit is essential for getting a low interest rate because lenders will feel more comfortable lending money to those who have already proven themselves to be responsible with credit, and having a loan is using credit. Therefore, lenders will raise the interest rate quite a bit higher with those having credit that is not so good just as a way to protect themselves against the risk of not getting the loan paid back in full.
If you have bad credit, you can either take the time to improve your credit by using credit and making sure you pay back the required payments on time each month (or however often you are supposed to pay), or you can look into secured loans. Secured loans allow the lenders to take assets away from you if you are unable to pay. These assets are agreed upon ahead of time, and must be valued at the same amount as the amount of the loan. Because lenders know they will have the assets if you are unable to pay the loan, they will generally feel they will not have to raise the interest rate so high in order to protect themselves against not being paid.