An installment loan is a product of financing in which the borrower is advanced with a sum of money, which has a fixed rate of interest required to repay it over time for a specified period. Generally, this is a loan product other than payday loans. It is categorized into two; secured and unsecured loans. With a secured loan, the borrower must provide collateral for the loan. Examples are auto loans and mortgages.
Unsecured loans do not have special requirements for the security of the loan. Often at times, people associate installment loans to personal loans. They are however, different. Installment loans can be described as loans. It is a broad field. However, this article shall present a discussion on some of its benefits and uses to help understand more on installment loans.
Uses of installment loans
As earlier highlighted, installment involves a broad scope of loans. All business, commercial, personal, public, etc. loans are categorized under installment loans. Therefore, the list is broad, given that every kind of loan deal with a specific line of credits.
To answer the question about if these loans can be used in covering expenses, yes, it is true that the group. However, at least one loan can be taken to purchase whatever you wanted. These kinds of loans are categorized as personal loans. In a nutshell, the purpose of a loan product is tied to the loan product itself. For example, business loans are meant to be used for business purposes only. Mortgages are for house financing, and many more.
Personal loans, especially from a licensed moneylender, can be used for a wide variety of applications. It can be used for purchasing groceries, consolidating credit card balances, financing pricey equipment, etc. these loans are slightly expensive since they are unsecured.
In other terms, the question instructs us to discuss if personal loans can be used for living expenses.
How do personal loans work?
Personal loans are unsecured installment loans. Many lenders offer them either in-store or online. These loans, as established earlier, do not have specified uses. However, they come with terms. Firstly, all loans have interest rates chargeable. Secondly., they have to be repaid within a specified agreed upon period, and one has to make monthly installments.
Additionally, some loans come with hidden fees such as origination fees, processing fees, prepayment fees, etc.
The loan application is usually followed by the lender’s valuation of your eligibility. This is done by checking your credit history and your income. Depending on the lender, you can have your funds approved within a short time.
Uses of personal loans
Debt consolidation:
You can take out a personal loan to refinance your credit card balances. This can be done if your current loan rates are high and the balances are almost due. Consolidation helps you to save on the amount you would have paid. Also, it assists you in arranging payment smoothly without a struggle.
Medical bills:
Be it an emergency or not, medical bills can inflate very fast within a short period. Your savings may not be helpful, hence pushing you to take a personal loan. It helps to re-organize things for you in regards to the medical bill. Also, pets do get sick, and their surgeries usually cost a fortune.
Student debt:
You are at liberty to service your student loan using a personal loan. This, however, is not advisable for several reasons. One is that it is financially imprudent to take a loan with a higher interest rate to pay for one at a lower price. Second, paying a student loan with a personal forfeit your right for deferments and forbearances. Furthermore, the term of the loan for student loans is extensive and does not expire until it is all paid. It would be unwise paying a student loan with personal loan funds.
Wedding costs:
Weddings nowadays have turned into expensive party events that intimidate people with expenses. You can take out a personal loan to supplement your savings.
Divorce:
Divorce proceedings can be very costly. These bills may come in from lawyers. Legal unions and separations are expensive. However, personal loans can be of help here.
Vacation:
Many plans help people plan for vacations. But some vacations don’t occur when you plan for them as much as it is inadvisable to use personal loans for this purpose; you have the liberty of going all out and enjoying your vacation.
Expensive consumer goods:
These are goods that are so costly that you cannot afford them on your paycheck. Therefore, you put them on the personal loan. An example of these goods includes computers, domestic appliances, etc.
Moving expenses: moving may be necessary because of job transfers or relocations. Transport companies would charge you a fortune moving goods from one location to another across the country. Personal loans may turn to be your rescuer.
Funeral costs:
Usually, people do not save for this expense. However, it does occur, and sometimes it happens when finances are tight. If your cat figures out what to do with your loved one, take out a loan for the funeral and pay later.
Tax debt: do not make your taxes overdue. If the penalties are higher than the loan rates, consider taking a loan to complete your debt.
Home repairs: repairs or renovations can be very costly. For instance, if you are having problems with your roof, you will need replacement, which may not be in the right terms with your finances. You can take a personal loan for this.
Family or friend’s debt repayment:
Owing to your family member can be stressful. Debts are not good custodians of relationships. It is better to owe a lending company than your family member or a friend.
The bottom line
Installment loans are a broad category of loans that are secured using collateral or unsecured. They include personal loans, mortgages, auto loans, etc. personal loans can be used for any expenses, including buying domestic items, food, vacations, Christmas, etc.
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