For some people, the term “installment loan” might sound a little distant. However, installment loans are more common than you may expect. The reason they are called “installment loans”, is because each payment made monthly is called an installment.
These loans are just another method in which you can borrow a set amount of money for a specific purpose. The main difference between installment loans and other forms of revolving credit, such as credit cards, is that you need to decide the exact amount of money you need beforehand. Once you do that, you will have to determine the terms of it and how you are going to pay it.
Of course, as it happens with almost every single loan method in our country, there are fees for installment loans that you need to know.
Are you familiarized with these loans already? We will give you some examples below.
How do these loans work?
Before going deep with installment loan fees, we must first understand what they are. Generally, almost all the common loans that people apply for are considered installment loans. As simple as that. This means that your auto loans, that help you pay your beloved car, are also an installment loan. You pay for your car monthly with lent money for a certain period of time. Of course, the more time you take to pay for your car, the more money you will end up paying.
The same happens with mortgages, which is a kind of installment loan to buy a house. In this case, interest rates are fixed due to the high amount of the loan. So, if you are thinking what is the average fee amount for an installment loan the answer is simple – it depends. It’s not the same to buy a house as to ask for a personal loan, for instance. In this case, paying a medical bill with a personal loan usually takes up to 96 months, while paying for a house can take even more years.
The best thing about installment loans is the fact that you can predict how much and when you are going to pay off your debt. If you pay on time, there will be no installment loan fees. This creates the need to educate ourselves in order to prevent financial emergencies in our pockets. Besides, with installment loans, you can know the specific date that the debt will be totally paid off. The shortest the term, the less you pay.
So, what are the fees on installment loans?
When you apply for installment loans online you should pay attention to all the information that the lending company can provide you.
Usually, it is easy to see the estimated Annual Percent Rate before applying for the loan. Obviously, this will hardly depend on your credit score and your overall credit health. This means that it is not possible to offer a determined range of fees without analyzing your profile because the loan entirely depends on your credit history.
In any case, you as a borrower should take a close look at any kind of fee that might appear.
For instance, late fees on installment loans are common, not only in this kind of loan but in any method of revolving credit. If you fail to pay within the specified time, then be prepared for an increase in your monthly payment. So, if you miss a payment on an installment loan, don’t doubt that there will be repercussions that also affect your credit health.
Besides, it is possible that a lender can demand an application fee which will increase the amount of the money you pay upfront. The credit check fees can also appear and are also a significant factor to change the rates you are expecting to pay.
Either way, it is crucial to understand that installment loan fees usually appear when you fail to pay as you should.
If you focus on paying on time, an installment loan can actually become a great way to improve your credit situation. Keep in mind that all these methods are tools that we can use to our advantage to improve our financial life.
