Not every American is lucky enough to have a safety net of cash. Unexpected expenses, like car repairs, can leave you short on funds and struggling to manage bills and monthly expenses. In these situations, some people may turn to loans such as online payday loans or other cash advances, but there may be other options available, such as installment loans online. Online installment loans may be an option for those who need quick access to cash but cannot afford to repay the whole loan in one lump sum. Installment loans are usually repaid over an extended loan term through scheduled payments and may offer some benefits.
We’re going to take a deeper dive into what installments loans are, and how they may benefit you.
What is an Installment Loan?
At its core, an installment loan is a specific amount of money you borrow from a lender which you pay back (with interest and/or fees) in a series of payments that may fall on your pay date. The amount and term of an installment loan may vary depending on a number of factors like the type of installment loan, your income, and how often you get paid (bi-weekly, monthly, etc.).
There are a number of different loans that would fall into the category of installment loans. In fact, you may already have one and don’t even know it! Things like certain auto loans, student loans, and home equity loans are considered to be installment loans.
One key feature of an installment loan versus another type of loan, such as a line of credit, is that it is not revolving, meaning, once you pay off your loan, you can’t use it again.
Small-dollar personal installment loans, like installment loans online through MoneyKey, are also typically unsecured. This means that you won’t need to put any assets up as collateral.
How Do Online Installment Loans Work?
As we’ve mentioned, installment loans are different from something like a line of credit as they are not a revolving form of credit.
For example, let’s say you’ve applied for an installment loan and you’ve been approved for a $2,500 loan. If you finish paying off your loan and need more funds, you’ll have to apply for a new loan.
Once you’ve been approved for a loan, the funds may typically be deposited to your bank account in as soon as the same business day (depending on the financial institution), giving you easy and quick access to the money you need when you need money fast. If you apply for online installment loans, much of the entire borrowing process can be done online.
Benefits of Installment Loans Online
1. Manageable Payments
Most payday loans are due in full on your next pay date without exception. This type of repayment structure may sometimes increase financial strain on a borrower. The main reason someone might apply for an online installment loan is that the repayment process may be more manageable. Instead of the total loan amount (plus fees and/or interest) being due on your next pay date, installment loans are paid back over time through scheduled payments.
The longer-term payment schedule may work better for some people because it makes repayment more manageable and convenient. Knowing the amount and repayment date can also allow you to include these payments in your budget and ensure that you have enough money left over to cover your other monthly expenses. Paying through installments, with the flexibility to repay early without penalties (depending on the financial institution), may allow you to manage loan repayment and monthly bills in a way that suits your needs.
2. Variety of Loan Amounts
Depending on the type of product, some installment loans may have longer loan terms and some lenders may offer a higher loan amount. For some people, these higher loan amounts can be enough to cover costlier emergency or unexpected expenses. Relatively, larger loan amounts coupled with manageable payments can also reduce your risk of needing to take out multiple loans to acquire enough funds to cover an unforeseen expense.
An additional benefit to installment loans online is speed. Depending on the product and financial institution, online cash advances such as installment loans may get deposited into your bank account as soon as the same business day. This may allow you to cover a necessary, immediate expense quickly. Admittedly, the processing times for different online financial institutions vary; however, a lot of time is saved because no back and forth trips to the physical location of the lender are required.
Many direct lenders offer installment loans online so you can have quick access to cash with spread out payments. Before you apply for an online installment loan, do some research and look for a state- licensed personal loan lender like MoneyKey. Be sure to read and understand the rates and terms of your loan product fully to ensure you’re making an educated financial decision. To find out more about installment loan products offered through MoneyKey, visit our Rates & Terms page.
4. Cover Unexpected Emergency Expenses
As much as you’d like to avoid them, unexpected emergencies pop up from time to time. Your car might break down, you might have a flood in your basement, or you may need to take an emergency trip to the hospital. If you don’t have enough savings to pay for these unexpected emergency expenses, an installment emergency personal loan may be able to help.
With personal installment loans, you may be able to get the money you need to pay for that surprise medical bill or auto repair that you just can’t hold off on.
For example, let’s say your car breaks down one day and you don’t have enough in your emergency fund to get it fixed. If you don’t use your car much and can get where you need to go through public transportation, maybe you can hold off on getting a repair until your next paycheck. But what if you or a family member needs the car to get to work? How much money will you be missing out on by not making your shifts? How many shifts can you afford to miss before your hours start getting cut back? In this type of situation, installment loans online may be able to get you the money you need so you can get back to work and avoid missing shifts at work.
5. Simple Application Process
If you’re looking to apply in person, the entire process may take longer. And what happens if the money you need is for an emergency, and you find out after waiting for long that your application was denied?
With online installment loans, the application process is simple. For example, to apply for a loan through MoneyKey, the online application will likely only take you a few minutes to fill out, and you can fill it out 24 hours a day, 7 days a week. You won’t have to work around the hours of operation and you won’t need to make an appointment!
6. Options for Different Credit Ratings
Even if you have poor credit, there may still be installment loans for bad credit online for bad credit that you can apply for. With some lenders, your credit score may not be the primary factor they weigh when assessing you as a potential borrower. For example, to qualify for personal installment loans through MoneyKey, you must:
- Be of legal age to contract in your state
- Be a US citizen or permanent resident
- Be a resident in the state where the product is offered
- Have an active bank account
- Have a regular source of income
- Have a valid contact number and an active email address
If you’ve had some financial troubles in the past that have led to poor credit, you still may be approved for a loan if you can prove that you’ll be able to afford the repayments.
Things You Should Know About Installment Loans Online
1. Early Payment
When it comes to paying off installment loans, some financial institutions may charge an early repayment fee if you try to repay your loan faster than the original schedule. However, some financial institutions, like MoneyKey, won’t penalize you for paying off your loan early. Either way, it’s important for you to know what your payment options are, and even if you don’t have the option of early payment, you should always be aware of the total cost of your loan. Remember that the sooner your loan has been paid off, the less interest you’ll pay in the long run.
2. Understand your Payments
Typically, the due dates of your payments for an installment loan are based around when you receive your income. If your bank account is going to be debited for your loan, make sure you know exactly what’s happening on your due date. You’ll want to pay special attention to instances where you’re due to make a payment on a weekend or holiday. If your payment is due on your pay date and if the date your income goes into your account gets shifted around for whatever reason, you’ll want to inform the lender ahead of time so you can avoid any unnecessary charges.
You should make sure you understand the cost of your loan, what your prepayment options are, and that your payment schedule is correct to avoid paying back more than you should.
3. Potential Effects on Your Credit
Sometimes when you apply for a loan, the lender performs a hard inquiry into your credit to assess you as a borrower. This inquiry gives creditors a glimpse of your borrowing history, whether you’ve used a mortgage, a credit card, a student loan, or an auto loan.
A hard inquiry may reduce your credit score to some extent, so it’s important to be mindful of how often you apply for credit, because each inquiry will be added to your credit report.
Consider Installment Loans Online When You’re in a Pinch
When an unexpected emergency expense rears its ugly head, not everyone has the savings to handle this unforeseen expense and still mange to take care of their usual bills. When this happens, installment loans online may be what you need to help you take care of this expense and still keep up with your normal expenses.
If you need an influx of cash and want a straightforward and simple application process, an online installment loan might be right for you!