Installment loans offer a single lump sum amount instead of revolving credit, which consists of products like credit cards and home equity lines of credit (HELOC). This makes them ideal for a big purchase or to fund an emergency expense.
Regardless of your credit goal, it’s essential to understand how these debt options work and when they make sense.
Flexibility
Installment loans are an excellent option for many people and businesses because of their flexibility. Personal, auto, and mortgage loans are a few types of these loans. Documentation such as bank statements, pay stubs, and evidence of income are usually required for these loans. Verifying one’s identity and income through these documents is essential when applying for credit.
Installment loans like those offered by MaxLend Loans also allow borrowers to spread out the repayment of the borrowed amount over a predetermined period, facilitating better money management. Due to the flexible repayment terms, individuals and businesses can select a schedule that best suits their cash flow and financial limitations. Furthermore, various installment loan choices meet different financial requirements, including financing a personal project, buying a car, or buying real estate. The variety of loan options guarantees that borrowers can find a customized solution that satisfies their unique needs and financial objectives.
Fixed Monthly Payments
Few people can afford to buy a home or an automobile without borrowing money, and that’s okay. What’s important is how you manage your debt. While there are many ways to borrow, the two main types are installment and revolving credit. Installment debt includes mortgages, auto loans, and student loans. Credit cards and home equity lines of credit are examples of revolving credit; they let you spend up to your credit limit and carry a balance from month to month.
Installment loans are best for borrowers who want to make a large purchase and repay the loan over time because their monthly payments are fixed. However, revolving credit makes sense for smaller purchases since you can withdraw funds whenever you want and pay only monthly interest.
Flexible Payment Options
You might need to borrow money throughout your lifetime for many reasons. Whether for a new car, college tuition, or a home renovation, borrowing can help you achieve your goals while protecting you from financial emergencies.
Luckily, different types of loans are available for your needs, including installment and revolving credit.
Installment loans give you a lump sum you repay each month for a predetermined amount. You can find them from banks, credit unions, and online lenders. Fixed interest rates typically back the loans and can fit into any budgeting plan.
Low Interest Rates
Generally, getting better interest rates with installment loans is more accessible than revolving credit. Installment loans typically include a fixed amount of principal and interest you pay back over a set period, such as a year. This is in contrast to revolving debt, which allows you to borrow and repay amounts continually as long as you remain within a specific credit limit.
For this reason, revolving debt works best for consumers who know how much money they’ll need to borrow and prefer predictability in their payments. T
Convenience
Installment loan types include mortgages, auto loans, and personal loans.
However, you may need more flexibility with these accounts, especially if your monthly budget is tight. Revolving credit is another common open credit type, including the popular credit card and HELOC. This kind of credit resets available funds after you pay back the balance, and account balances account for almost 30% of your credit utilization on a credit report. As such, carrying high balances on your revolving credit assets can hurt your credit scores. However, you can minimize this by shopping around for the best terms.
