Some people may decided to apply for a loan when they’re facing unexpected emergency expenses and they don’t have any savings to cover them.
In some cases, it may get tricky to repay your loan in one lump sum - only a couple of weeks after you get it. This in turn may make borrowing seem like a stressful experience.
So how are installment loans, such as online installment loans with monthly payments, any different? These personal loans come with repayment terms that spread out your payments over a relatively longer period of time.
But how does an installment loan work, let alone one with monthly payments? And how do they differ from payday loans? Let’s find out.
What Are Installment Loans?
Installment loans are a type of personal loan you repay through fixed, multiple payments over a predetermined period of time or term.
Keep in mind that a variety of loan products may fit these guidelines while offering a range of loan amounts, at various rates, and for different purposes.
This makes installment loans an umbrella term that encompasses several different types of products, including auto loans, mortgages, and personal loans.[1]
Each of these examples may play a unique role in your finances at specific times in your life. Auto loans are there to help you borrow for a vehicle. Mortgages help you get a foot on the property ladder. And personal loans may help you handle big purchases, or sometimes, unexpected emergency expenses.
What Are Some Characteristics of Installment Loans?
As mentioned, there are multiple types of personal installment loans, but there may be some basic characteristics which are generally shared by different types of installment loans.
Let’s take a look at them below:
- Your money arrives up-front in one lump sum.
- You make multiple regular payments to pay off what you borrowed (the principal) as well as other charges such as any applicable interest and/or fees.
- Your loan term ends once you pay off your loan in full — the only way to access more money is to apply for a new loan.
What Are Installment Loans with Monthly Payments?
In some cases, if you get paid on a monthly basis, your loan payments may be due back monthly. However, keep in mind that there are different kinds of pay frequencies (such as weekly, bi-weekly, and semi-monthly) and those could determine when you’re expected to make your payments.
For a more specific timeline, be sure to ask your lender and always look at your loan agreement. This document will generally outline your payment amounts and their due dates.
Today, we’re specifically narrowing our focus on personal installment loans with monthly payments.
These loans are meant to be repaid over time. How much time you have varies, depending on your lender, location, and loan amount.
Broadly speaking, you’ll pay off this kind of loan with multiple, equal-sized payments. In other words, you’ll pay the same amount each time you make a payment for the duration of your term.
In this particular case, you’ll make monthly payments. All this means is you must make these payments once a month on the days determined by your lender and set out in your agreement.
How Are Payday Loans Different?
A payday loan may be an option when you need fast cash up-front. Like an installment loan, it arrives in one lump sum.
But that’s where a payday loan and installment loan split off. Here are some of the differences you may expect when borrowing with payday loans.
Term
Unlike installment loans, such as monthly installment loans, your term will be much shorter. You tend to pay these back all at once by your next pay date — hence the name, payday loans.
Loan Amount
The amount you receive with a payday loan also tends to be less than what you would get with the typical personal installment loan. While a payday loan may float you as much as $1,000,[2] an installment loan may offer more than that. It depends on your lender and eligibility.
Eligibility Criteria
Payday loans may be an option for people with bad credit or no credit at all as the lenders for these loans may sometimes offer a range of eligibility requirements.
Monthly installment loans may also be an option if you have bad credit and some online installment loan lenders may cater to both prime and subprime borrowers.
Why Choose Online Monthly Installment Loans?
Depending on your situation, using this type of loan in an emergency may be helpful. Here are some benefits you should know about online installment loans, such as monthly installment loans.
1. Apply at Any Time
Nowadays, most banks are open from at least 9 a.m. to 5 p.m. There may be some exceptions, but most branches still follow hours that may make it difficult for people to visit, especially those who work full-time during the day.
This may complicate things if you can’t make it out to their branch while they’re open. Or, if an unexpected plumbing emergency happens in the middle of the night, and you need cash as quickly as possible.
This is when applying for a loan with online installment loan lenders may be helpful as many of them offer simple online applications 24/7. You may be able to fill out an application on a lender’s website at any time, even if that’s in the dead of night.
While they also have business hours during which they may contact borrowers and service loans, this one crucial difference sets these lenders apart from storefront locations.
The faster you kick-start the application process, the faster you may get money when you need it.
2. Longer Terms
Compared to a payday loan, monthly installment loans come with longer repayment terms. One feature of installment loans is that your payments are spread out over time through a series of fixed, scheduled payments.
3. Higher Borrowing Limits
You may receive a higher borrowing amount as a result of these longer terms. Of course, how much you receive will vary depending on your lender. The amount you are eligible for may depend on a variety of factors, such as your income or your credit score.
You may also apply for more funds if you qualify for a secured loan (a loan that requires collateral) or a cosigner loan (a loan that requires you to borrow with the help of an additional applicant who is also responsible for the loan).
4. Access to Cash
In an emergency, you may not have time to wait to find out if you qualify for a loan or not. Some traditional lenders may take days to consider your initial application, thus delaying the timeline of when you may receive your funds.
However, some online installment loan lenders work on a timeline that’s sensitive to financial emergencies. You may find out if you qualify within minutes of applying, and if approved, you may receive your cash as early as the next business day.
That also includes loans offered through MoneyKey! If you get paid monthly and if you’re approved, you may get your money fast.
5. Fixed Payments
Fixed payments mean that the amount you pay at each installment won’t fluctuate over your term. You’ll know the amount you owe, as well as all your due dates in advance. This may help you budget for your installment loan payments.
Options for Bad Credit
Some monthly installment loans may be an option regardless of this three-digit number. For example, some lenders may also ask to see a proof of employment and your income, to help them decide if online installment loans with monthly payments are the right fit for you.
Additional information may help lenders understand your current abilities to repay a loan in ways that your past borrowing habits may not on its own.[3]
Before You Apply for Installment Loans with Monthly Payments…
While an installment loan may be a good option for some borrowers, it’s not a one-size-fits-all loan. No two installment loans are alike. Loan amounts, terms, and rates vary greatly between lenders and your eligibility. Even your location may impact what you get, as each state has unique laws to regulate installment loans and lenders.
Whether you’re searching for monthly installment loans for an urgent expense or you’re considering them as an option for the future, make sure you keep the following information in mind.
Eligibility Requirements
Just because you’re eligible for one type of installment loan doesn’t mean you’ll qualify for all of them. Each lender sets its own eligibility requirements, and they may vary greatly.
To improve your chances of qualifying — and later being approved — always check the requirements for applying for monthly installment loans, or loans of any kind. This information may be found on a lender’s website. You may also call them to speak directly with a representative to learn more about their criteria.
Interest and/or Fee Charges
Your charges, such interest and fee rates may sometimes be determined by your credit history. Lenders may check this report to see how you’ve managed credit in the past. It may help them form an opinion of how you’ll manage the loan if they approve you. You may still qualify for some online monthly installment loans, but you may pay higher rates as a result of your poor credit. However, with some lenders, your credit history won’t affect the rates of your loan, but instead may affect your loan amount.
Either way, knowing these rates is important before you apply for a loan. It helps you determine if monthly installment loans are an affordable option for your finances.
Additional Fees
While interest rates are sometimes the most talked-about charge applied to personal loans, it may not be the only charge that you may pay when you borrow money.
Read over your loan agreement carefully to see if your lender charges any other type of fee such as origination, late, processing, or prepayment fees. Not all lenders will charge all of them. If they do, they may vary greatly in cost.
Pay particular attention to early or prepayment fees. Some lenders may charge you a fee for making these payments. So, always confirm their policy and understand how you may be affected by early repayment before you make any payments at odds with your schedule.
Why Apply for Online Installment Loans with Monthly Payments?
With monthly installment loans, you can borrow a pre-set amount of money that you have to pay back (along with interest and/or fees) over a pre-determined time.
This repayment schedule spreads your payments over an extended period, in comparison to payday loans that are due by your next pay date.
Your payments won’t surprise you; they’re fixed, regular payments that are due once a month — making them easier to anticipate.
These facts combine to potentially make borrowing a hassle-free experience. But while there are a lot of advantages to using monthly installment loans, they may not be the best fit for every borrower. You’ll only know if it works for you once you start researching your options.
Take the time to consider these options carefully. If you have an unexpected emergency expense that your savings won’t cover, contact us anytime to learn more about the online loans offered through MoneyKey. We’re always happy to help make your borrowing experience less stressful!
[1] https://www.investopedia.com/articles/personal-finance/072316/how-installment-loans-work.asp
[2] https://www.investopedia.com/ask/answers/102814/what-are-basic-requirements-qualify-payday-loan.asp
[3] https://www.nerdwallet.com/blog/finance/lenders-credit-score-interest-rate/
