When you’re low on funds and your bank account is in need of a little boost, should you automatically give yourself the green light to apply for online installment loans?
The easy answer is no. The truth is, it’s a little more complicated than that. While online installment loans can be a useful financial tool to use in certain times of need, you’ll need to consider if it’s the right time and place before you apply for one. This is an important part of staying financially responsible.
What is an Installment Loan?
Broadly speaking, there are certain characteristics that all installment loans have in common. For starters, if you get approved, you’ll receive your funds in the form of a lump sum. Secondly, your payments, which will include the amount you borrowed plus any interest and/or fees, will be laid out ahead of time in a series of scheduled and generally equal amounts.
Of course, when we get into more specific types of installments loans like auto loans, student loans, mortgages, and more, there are specific nuances that separate these from each other.
With all of these options out there, knowing which type of installment loan is best suited to your needs is an essential part of the borrowing process. First, you’ll need to figure out which one is designed for your purposes, and then you’ll need to make sure it’s something you can afford. After all, if you need help dealing with an unexpected expense, it wouldn’t make sense to submit an application for a mortgage. And even if you find the type of loan that’s meant to help you out in emergencies, you wouldn’t want to apply for it if it’s not something you can afford to pay back.
What are the Differences Between Long- and Short-Term Installment Loans?
When we’re discussing the term of a loan, what we’re specifically referring to is how long it takes to pay it off. Let’s take a look at some of the differences between long- and short-term installment loans.
What are Long-Term Personal Installment Loans?
So, when we say “long”, how long are we really talking about when it comes to personal installment loans? Well, at the longer end of the spectrum, these types of loans can take several decades to fully pay off. This is generally the case when the amount you borrow (your principal) is on the bigger end of things. In these situations, your scheduled payments will need to be broken down into smaller amounts to make them manageable to pay off, which could extend the term of your loan to many years.
So, what types of installment loans generally have a long term? These can include things like:
- Mortgages: These are a type of installment loan that’s used to help you buy property.
- Home Equity Loans: These are secured loans that require you to provide your equity in your home to qualify.
- Student Loans: These are loans that are meant to help you pay for school tuition and other school-related expenses.
While the term of these loans can vary based on a few different factors, they can all take decades to pay off in certain cases.
What are Short-Term Installment Loans?
When we’re talking about short-term installment loans, we’re usually referring to loans that can take a few weeks to pay off, or even up to a few years. These typically have a lower ceiling in terms of how much money you can borrow.
Even when you’re borrowing a smaller amount, your payments won’t necessarily be smaller than they would be with certain types of long-term installment loans. This is because you’ll need to pay back what you owe over a shorter period of time.
Similar to certain other types of short-term personal loans, short-term installment loans are often unsecured. This means that you won’t need to provide any sort of collateral to qualify. Because of this, the rates of these loans are usually higher than those that are secured.
What are Online Installment Loans?
When you want to apply for a loan in person, there are certain realities of that situation that are non-negotiable. For one thing, you’ll need to find time to go to a physical location to start this process. You’ll also need to adhere to a storefront’s hours of operation to apply for a loan. You may even need to spend precious time waiting in line to speak to a representative. These are things that can be a barrier to entry for people with busy schedules, or those who don’t live close to a storefront lender.
When it comes to installment loans online, a lot of the minutiae of the borrowing process is removed. You can research online financial institutions, submit your application, receive your funds, and pay back what you owe all from the comfort of your home. In some cases, you can even start your application any time of the day or night.
Going through this process online generally won’t change the nature of the online installment loan you’re applying for. You’ll likely still be eligible for the same amount of money, you’ll still get your funds in a lump sum, and you’ll still pay back what you’ve borrowed over the course of several pre-determined dates. The main difference is that the majority (if not all) of the process takes place online.
Should I Apply for an Installment Loan Online?
Now that we have a better understanding of some of the differences between different types of installment loans, the question remains – when should you consider applying for an online installment loan? Let’s take a look at some situations where this might be the case. Just keep in mind that while the instances on the list below might call for a personal loan to help you out, you should only ever apply for one when you know you’ll be able to pay it back.
1. Emergency Car Repairs
As much as you budget for scheduled car maintenance, there’s always a chance that something goes wrong despite your best efforts. Maybe you run over a nail, or someone accidently bumps into your rear bumper. If you need to make an unplanned trip to your mechanic and don’t have the savings to handle the bill, an online installment loan could be a potential solution.
2. Unplanned Home Repairs
There’s a lot that can go wrong with a house, and unfortunately, there’s only so much you can do as a homeowner to stave off unexpected repairs.
Let’s imagine an undetected leak in the roof leads to some big problems after a rainstorm. Or your furnace suddenly breaks down in the dead of winter. In both situations, you won’t be able to hold off on making the necessary repairs until you’ve saved up enough money to pay for them. The longer the problem lingers, the worse (and more expensive) it’ll get. With these types of emergencies, an installment loan online may be able to help.
3. Emergency Medical Expenses
Planning for potential healthcare expenses should be an essential part of your budget, even if you’ve generally gone through life without having to deal with any sort of recurring ailment. If you have any prescriptions you need to keep up with, regular physical therapy appointments, or even if you want to make sure you have enough money set aside for regular dental appointments, you should make a point to set aside a portion of your budget for these types of expenses.
The problem is, not every medical expense is something you can plan for. All it takes is a simple accident to tack on a pricey medical expense you hadn’t budgeted for. In these instances, if you find yourself short on savings, you might want to apply for installment loans online to help bridge the gap.
A Personal Line of Credit as a Flexible Alternative
Emergency expenses by their very nature can be tough to plan for. Without knowing when they’re going to strike, the best thing you can do to prepare yourself is to put together an emergency savings fund. This is a savings account that you contribute to for the sole purpose of helping you deal with emergencies.
The problem is that they can take a long time to build up, especially if you’re living on a tight budget. If you want to make sure you have a financial safety net to fall back on while you build up your emergency fund, a personal line of credit can serve this function. A line of credit is a form of revolving credit that allows you to draw funds against a pre-determined credit limit on a continuous basis. You can draw any amount you need up to your available credit limit, as long as you have available credit and your account is in good standing. If you want to have a flexible borrowing option at the ready, a line of credit may be right for you.
Consider Your Options Carefully
An online installment loan can be a useful financial tool, but that doesn’t make it the right option for every scenario. You’ll need to make sure that what you apply for aligns with your needs and your financial situation.
Before making any firm decisions, make sure to do your research and see what options may be out there for you. Whether you apply for an online installment loan or line of credit, the most important thing is to make sure you can afford what you’re applying for.
Disclaimer: This article provides general information only and does not constitute financial, legal or other professional advice. For full details, see CreditFresh’s Terms of Use.
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