How do installment loans work?

[Emily.181]

Hi everyone! So I'm currently having some financial difficulties and I would like a fast and efficient solution, but I'm not really sure what to do. I heard from a friend about installment loans but the term is rather vague to me. Are they better than paydayloans? Do you have any previous experience you want to share?

Looking forward to anything you might wanna share. It helps! Thank you!!

[Nutria]

Hi everyone! So I'm currently having some financial difficulties and I would like a fast and efficient solution,

There are no fast solutions to financial difficulties.

but I'm not really sure what to do. I heard from a friend about installment loans but the term is rather vague to me.

An installment loan is any type where you get a lump of money now and pay it off in chunks later, with interest.

Examples are: credit card purchases, car loans and mortgages.

Are they better than paydayloans? Do you have any previous experience you want to share?

The only thing I know about payday loans is that the APR is so high that you'll never get out of debt.

Having said that... if you can pay off payday loans in multiple chunks, then they are a form of installment loan.

[snafu]

.

Welcome to SA. 1st, whatever the problem, it will get much worse if you go to a Pay Day Loan type operation. You don't want to go there!

With some basic information we can likely make realistic suggestions. Many of us have had experience working our way through difficult money messes. It starts with a realistic picture of income and out flow along with a plan going forward.

[disneysteve]

As stated, there is not "fast" way out.

What sort of "financial difficulties" are you facing? Debt is often not the best way to go but sometimes it is necessary to avoid bigger problems. Tell us more about your situation. What is the need? What is the timeline for meeting that need? How much do you earn? What are your monthly expenses? What do you have in savings and investments? How's your credit? What debt do you already have?

[titlelo]

An installment loan is a general umbrella term used to describe loans that you pay over a period of time. Auto loans, mortgages, student loans, and etc are all specific terms for different types of loans. So in reality, you're probably already familiar with installment loans.

However, I have a hunch that you're referring to installment loans that are provided by short-term lenders. These type of loans are no different than payday or title loans. The trick is that some lenders use the term "personal loan" and "installment loan" as guise to push their high-interest loans. Why? Because these terms don't have a negative connotation associated with them like "payday loan" or "title loan". As an example, if you Google "title loans", you will find governmental websites that warn of title loans in the results (ex. consumer.ftc.gov/articles/0514-car-title-loans). In comparison, If you search for "installment loans", you won't find that. So it behooves these lenders to repackage and re-market their loans as installment loans.

Don't get me wrong, I'm not panning short-term loans. I'm in the title loan industry myself. I just wish there was a bit more regulation because short-term loans do serve a purpose. Think about it. Not everyone has perfect credit. The ones who do have no problem getting a loan from the bank. However, if you're what the market calls "subprime", no loan officer in their right mind will lend you $1,000+, no matter what the emergency. That's where short-term loans come in. Unfortunately, they've been "used and abused" by lenders. It's only a matter of time when "installment loans" will be just as dirty.

In your case, the first step is to try working longer hours or performing odd jobs on the side. Next, ask a friend or family member for loan. If that doesn't work, try selling some things around the house that you don't need. After you've exhausted every possible way to get money, then you can start exploring short-term lending. Just remember a few key tips.

1. Never keep these types of loans for more than 2 months. Pay it off as soon as possible.
2. Stay away from sites that look spammy. They usually have super vibrant colors with a woman holding cash saying "Get Cash Now!".
3. Read online reviews about the lender you're most interested in. Go to platforms that are highly moderated like Yelp and stay way from Consumer Affairs.
4. Don't borrow more than you absolutely need.
5. Go with a lender that doesn't charge pre-payment penalties.
6. Always read the fine print! (interest rates, fees, etc.)

Good Luck!