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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 installment loans, in particular, are ubiquitous. But, what are the ways people are using this loan?
We’re exploring the most common reasons people take out installment loans and the various factors to consider if you are considering borrowing money yourself. Read on to learn more.
Key Takeaways
Installment loans are popular because they don't exclude bad credit borrowers. They are most commonly taken out for medical bills, home repairs, auto expenses, debt consolidation, and education.
If you are unfamiliar, 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. Here are the top 5 reasons borrowers take out a personal loan.
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 a significant bill must be paid.
Installment loans can help alleviate some of this stress. The application process is simplified compared to other loans and can 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 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.
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.
We recommend speaking with a professional if you are considering refinancing your debt by taking out an installment loan. 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.
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 common 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 people tend to underestimate when setting aside money for education. For these, people frequently take out installment loans as well.
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.
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.
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.
Couples often turn to installment loans to cover wedding costs due to the significant expenses associated with tying the knot. From venue rentals to catering and attire, weddings can quickly become expensive affairs. An installment loan provides a lump sum of money that can be used to cover these costs, allowing couples to spread the expenses over time with manageable monthly payments. This can be particularly appealing for those who want to have their dream wedding but may not have the savings to cover all the expenses upfront.
People seek installment loans as an alternative to payday loans for several reasons. Unlike payday loans, which typically require repayment in full by the borrower's next payday, installment loans offer more flexible repayment terms. This can help borrowers avoid the cycle of debt that often accompanies payday loans, where borrowers may find themselves repeatedly borrowing to cover previous loan payments.
Buy-now-pay-later loans (BNPL) have grown in popularity because they apply the installment loan format to major purchases. This allows buyers to get their hands on an item immediately, but pay for it over time. It is perfect for our impatient culture!
On a more serious note, a BNPL loan is an installment loan that works in a very similar fashion to regular installment loans, but it is usually taken out during the online checkout process.
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 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 why 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. Check how long the repayment period is so you can fiscally prepare yourself to repay 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. This shouldn't be too complicated as the payments are often small and equal.
However, we recommend setting reminders on your devices just in case. Furthermore, you may wish to set up automatic deposits into a savings account to ensure that you set aside sufficient monthly funds 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 needed, 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 cannot predict. However, how we handle them can make life much easier.
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