An installment loan: what is it? How do they work? Should people consider personal loans over installment loans from MaxLend Loans?
What is an installment loan?
By simple definition, an installment loan refers to credit granted by banks or financial institutions to an individual. This type of loan is a form of consumer credit that is often used to consolidate several loans or to pay off creditors. The terms of repayment, i.e. the exact amount of the borrower’s monthly installments and the duration of the loan, are fixed and indicated in the terms of the contract.
In general, installment loans are both flexible to use, easy to obtain but also expensive because interest rates and administration fees are high compared to the market rate of other loans. As in all credit cases, it creates a risk of over-indebtedness.
Understanding installment loans versus others
There are different types of credits to consider when applying for an installment loan. The installment loan, in the strictest sense, is where the specialized lender lends a person money for a fixed period. He or she then must repay that a portion of that loan at fixed times, not to mention the interest involved.
The lender provides people with the option of paying the loan back in several installments. This is a form of loaning that people must repay on regular dates and sometimes with interest. There is also joint financing, which is a possibility offered by certain lenders, like car dealerships.
When it comes to joint financing, as is the case with auto dealers, for instance, a person can lease a car and pay a monthly amount. The sales contract mentions that generally after a period of 2 to 3 years, the driver has the choice of returning the vehicle or buying it at a fixed price. Then there is an interest-free loan, which is a loan that is devoid of additional fees or interest.
Each month, the sum of the loan corresponds to the price of whatever purchase was made. This is an advantageous offer provided the borrower can pay back the monthly installments, otherwise, they will be required to pay interest on delays and be mauled with additional fines.