Life can be expensive. When large sums of money must be paid to cover emergency expenses, education costs, home renovations, and the like, few people have the cash on hand. This is why loans, installment loans, in particular, are ubiquitous in America and across the world.
We’re exploring the most common reasons for which people take out installment loans and the various factors to consider if you are thinking about borrowing money yourself. Read on to learn more.
An installment loan is simply a loan that can be paid back in installments. Most commonly, the installments consist of equal, fixed payments, the terms for which are agreed upon when the loan is initially processed. Installment loan amounts vary according to the lender and applicant as well as the reasons for the loan. For instance, there are installment loans for emergencies and education costs.
Installment loans are excellent options for people because the pressure to pay back an entire loan at once can be daunting. The possibility to pay a loan back in smaller, regular payments is far more attractive for most Americans.
There are endless reasons for which people take out installment loans. We’ve compiled a list of the most frequent ones to help explicate how others are using installment loans as an option to ease their financial burden.
Emergency expenses are one of the most common uses for which people take out installment loans. This comes down to the simple fact that unexpected expenses can be extremely costly, and most Americans do not have the cash sitting aside in case they arise. We’ve documented the most common emergency expenses below.
A trip to the hospital is not only stressful, but they are also expensive. If you are lucky enough to have sufficient insurance coverage, you may find your bill reduced; however, this is not the case for the vast majority.
Perhaps, it is an unexpected appendix removal, or an emergency room visit for a broken arm. Regardless, the issue must be dealt with and therefore, a significant bill must be paid.
Installment loans can help alleviate some of this stress. The application process is simplified as compared to other loans and can even take place entirely online. Plus, you will find out if you are approved quickly. When an unexpected trip to the hospital arises, installment loans are an option that can help you get the money you need right when you need it.
Home Repairs are another unexpected expense that people tend to use installment loans to pay for. If your house needs a new deck because it is infested with termites, or your heating system has broken down mid-winter, you need immediate repairs. The longer you wait, the worse the problem could become. However, having the money on hand to pay for these necessary repairs is often an issue.
Depending on the repair cost and how desperately it must be completed, you may wish to consider an installment loan. Rather than dipping into hard-earned savings or accepting terribly high-interest rates on your credit card, an installment loan could be an interesting option.
Car repairs are costly and often unexpected. Perhaps, it’s a minor fender bender or simply wear and tear, you need to solve the issue to avoid fines for driving around in a broken vehicle. Somehow car repairs always seem to cost more than one would expect. Even just a broken headlight can mean a serious hit to your savings.
An online installment loan is a great option to help pay for emergency car repairs. You can apply online while your car is in the shop and have the money you require to pay for the work when it is due.
Needing to travel unexpectedly is another common use for installment loans. Travel is expensive in itself, but last-minute travel (for emergency purposes) is often exorbitant. People frequently use installment loans in these situations because they can access the money quickly.
If you need to get on the next plane to witness your sister give birth, you can’t wait around for a slow loan to come through. In the case of unexpected emergency travel, an installment loan is a common option for many people who need to be somewhere and thus, need to pay for it.
Emergency expenses are commonly paid for using installment loans; however, there are various other reasons. Let’s take a look at these expenses for which many people use online installment loans.
In many ways, a home renovation is an investment. The more money you put into your home, the more you usually get out of it when it comes time to re-sell. However, renovations are costly, and few people have the cash to pay for them in one lump sum.
For this reason, many people pay for renovations by taking out an installment loan. As the loan can be paid back in smaller payments over time, the investment in bricks and mortar is worth it for many people.
It is not advised to do this unless you have thoroughly evaluated the numbers. For instance, if your home is well located and the market is doing well, it may be a better idea than if it is not. In other words, if it is very likely that you will be able to re-sell your home for much more with a renovation than you would without one, taking out an installment loan to pay for it could be a great option.
Another main reason people tend to take out installment loans is to refinance their debt. If an individual has various debts at different interest rates, it could save them money to pay of some by taking out another with a lower rate or better terms overall. Installment loans are attractive in this sense because they can be paid back in smaller amounts.
For example, if someone has a large credit card debt with compounding interest, it may be optimal to take out an installment loan to pay it off now and then pay off the installment loan in small payments over a longer period of time.
If you are considering refinancing your debt by taking out an installment loan, we recommend speaking with a professional. Refinancing can be an excellent option to save you money overall however it usually takes some careful calculations so you can be sure you are making the best financial call for your situation.
Similar in some ways to refinancing, consolidating debt is another reason or which people take out installment loans. Consolidating debt simply means paying off some debts using another debt. For instance, if you have credit card debt on four cards for several small amounts, it may be easier to take out an installment loan and pay off all four cards. Then you have fewer bills at the end of each month, fewer terms to consider, and thus, you are less likely to miss payments and incur unnecessary charges simply due to being disorganized.
Consolidating debt by taking out an installment loan can be a great option to save yourself money however, again, this is something you should thoroughly analyze and consider. The better you understand the terms and repayment schedules of each debt, the more likely you are to save yourself money in the end.
Another common reason people take out installment loans is to build credit. Perhaps, you are young and have never had a credit card. Or maybe, you have built up some bad credit history that you would like to mitigate. Taking out an installment loan gives one an opportunity to pay back each required payment on time and therefore, build up a good credit history.
Again, if you are considering this as an option for yourself, be certain you are able to pay the installments on time otherwise you may find yourself doing the opposite of what you had initially intended!
Education is expensive. Whether this is special education to assist a child with certain requirements, or simply college tuition, people usually do not have the funds they need all at once. This is why installment loans are often taken out to pay education fees.
Online installment loans are very straightforward in terms of the application process making paying tuition on time easier. Financing one’s education with an installment loan is a common occurrence as it eases the dip into savings or other debts with more strenuous terms.
Even if you have the money to pay for education costs all at once, there may be extra fees that come with schooling. Living costs, books, additional tutoring, and mandatory field trips are just a few other expenses that people tend to underestimate when setting aside money for education costs. For these, people frequently take out installment loans as well.
Though this one may seem bizarre, many people do take out installment loans to assist with paying their taxes. Taxes tend to come quicker than most people realize each year and sometimes, people aren’t able to set aside the money they need to pay them on time. Installment loans can be a helpful option when it comes to taxes because they provide the money you need when you need it.
Taxes must be paid when they are due otherwise it could lead to a legal headache down the line and even for years to come. Taking out an installment loan is an option many take so they can pay their taxes on time and then pay off their loan through the course of its terms.
If your situation falls into one of the aforementioned categories, you may wish to consider the option of an online installment loan. They are popular across the country because many people do not have the large amounts of money set aside to pay for various expenses that require immediate and complete payment.
If none of these common reasons for taking out an installment loan fit your situation, it could still be an interesting option for you. There are various additional reasons for which people borrow money to be paid back in installments. If you are considering doing so, be sure to remember the following.
Discuss the terms with the lender and make sure you evaluate them according to your situation. Be certain that the fixed installment amounts are realistic when it comes to your income and expenses. And check how long the repayment period is so you can fiscally prepare yourself to pay back the loan for several months.
Understanding the terms of the loan will help you pay it back on time and therefore, not end up paying more than you had initially accounted for.
When taking out an installment loan, be sure to organize your plan for repaying it on time. As the payments are often small and equal, this shouldn’t be too complicated. However, we recommend setting reminders on your devices just in case. Further, you may wish to set up automatic deposits into a savings account so you can be certain that you are setting aside sufficient funds each month to pay the installments.
The more organized you are, the more seamless the installment loan process will be.
Many people across the country take out installment loans for various purposes. The fast application process means you can access the money you need right when you need it which tends to mitigate stress. If you are considering taking out an installment loan, be sure to organize your repayment plan and thoroughly understand the terms of the loan.
Life is full of unexpected expenses that we simply cannot predict. However, how we handle them can make life much easier.