Everyone strives for the maximum satisfaction of his needs and surrounds himself with the best and practical things. This applies to both repairs and all purchases. But not everyone can afford to upgrade their wardrobe or buy a new phone for cash. This is why installment loans are invented. They are supposed to make our lives easier and enable us to buy a little more than we can currently afford.
Let’s take a look at the credit summary. A loan is the targeted financing of a bank for the purchase of a certain product through borrowed capital at a certain interest rate and for a certain period of time. That is, the bank pays for your purchase in full and you return the money to them taking into account the interest rate set at the time of signing the loan agreement.
What are Installment Loans? The concept of an installment loan is slightly different – it is a purchase method in which the store offers the buyer the opportunity to pay for the goods in equal installments without additional payments for several months. That is, the deal allows the buyer to pay off the debt for the goods in small pieces in order to increase the demand for their goods.
What are installment loans?
It is the delivery of goods or money by the lender to the borrower for free use. The procedure is based on a legal agreement that defines the rights and obligations of the parties and guarantees compliance with the prescribed conditions. In contrast to the essentially similar storage agreement, the Credit services Offer the right to use the item or money received on condition that it is returned in the quality and quantity received.
Basic conditions for installment loans: what are they:
- The subject of the contract can only be a product, a service or a certain type of work;
- The purchase price is divided into several payments and may not exceed the product price;
- There is no cash payment in the form of regular interest charges;
- The buyer is forced to pay a deposit;
- The transaction is concluded within half an hour based on the minimum requirements for customers with submitted online application;
- The contract period is usually no more than a year, but sometimes even 18 months;
- The debt repayment frequency can be a week or a month.
The most important rule is to always contribute on time. Otherwise you will have to pay late fees, which is not very convenient and very expensive. Interest on arrears is calculated as a percentage of the amount of the payment obligation not fulfilled on time and calculated for each day of the delay in payment.
Types of Installment Loans: What Are They?
There are two main types of installment payments: interest-free and with interest. The first option is more profitable for the buyer due to the lack of commissions and markups. You can place an application directly on the website or in the sales area of the store. If the transaction is made through a bank, the financial institution may charge additional service fees. The installment payment option is available in many banking institutions that have extensive partner shop networks.
The creation of a credit history begins with the signing of the first loan or credit agreement, the purchase in installments or the opening of a credit card. Sometimes a lack of creditworthiness is worse than an installment loan with a bad creditworthiness, since in such a situation the bank has no idea about the financial situation of the customer. How to achieve a good credit rating in just a few steps:
- All obligations should be paid on time.
- You need to keep track of your history regularly, and not just when it is time to take out a new loan.
- Don’t be anonymous. You can take advantage of small loans or get a credit card.
If the customer has forgotten the due date of the debt or has taken out a cash advance that cannot be repaid, it should be remembered that bad credit is not a set. Anyone can improve their credit rating anytime, and if you need extra cash now, don’t forget that there are non-banks in the market willing to provide installment loans for poor credit ratings.