Installment or Personal Loan? How to Decide Which is Best for You
Friday, September 1, 2017, 12:00 PM | Leave Comment
While a personal loan is a type of installment loan, an installment loan is generally considered a tool used to finance a specific purpose.
For instance, you may get an auto loan to buy a car or a home loan to buy a house.
A personal loan can be used to consolidate debt, start a business or for any other purpose that you see fit.
How do you know which type of loan is best for you?
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Which Loan Offers the Better Interest Rate?
As a borrower, you want a loan that has the lowest possible interest rate. Personal loans usually come with rates of 5 to 25 percent depending on your credit and whether or not you choose to secure the loan. Car loans typically have rates of 5 percent or lower while mortgages have interest rates of 4 percent or lower.
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Do You Want a Lien on Your Property?
When you take out a car loan, it is necessarily secured by the vehicle that you purchase. If you get a personal loan to buy a car, that loan may be unsecured, which means that you don’t have to repay it before selling or trading the vehicle. Furthermore, unsecured debts may be easier to discharge in bankruptcy.
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What Are the Advantages of an Installment Loan?
An installment loan may be ideal for those who are looking for a fixed monthly loan payment. It may also be best for those who want to know exactly when their loan will be repaid.
Some companies, like Las Vegas Finance, know that repaying your loan is a very important part of the process. There are typically no prepayment penalties with an installment loan, and it may be possible to refinance it at any time.
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Which Loan Type is Easier to Get?
Depending on your credit score, it may be easier to get a personal loan as opposed to an installment loan. It may also be easier to get a personal loan when you need tens of thousands of dollars to start a business as most banks won’t finance startups without a track record of success.
However, installment loans may be ideal for those with good credit or those who don’t need more than a few hundred dollars at a time.
Regardless of what type of loan you choose to take out, don’t borrow more than you can afford to pay back. It is also important that you shop around to find the best rates and the best lenders to work with. This makes it easier to find an affordable solution to meet your short or long-term financial needs.
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Rachelle Wilber is a freelance writer living in the San Diego, California area. She graduated from San Diego State University with her Bachelor’s Degree in Journalism and Media Studies. She tries to find an interest in all topics and themes, which prompts her writing. When she isn’t on her porch writing in the sun, you can find her shopping, at the beach, or at the gym. Follow her on twitter and Facebook.
