What is a personal installment loan?
A personal installment loan is a type of loan where you borrow a sum of money and must pay it back in fixed amounts called “installments.”
Personal installment loans are closed-end loans, meaning that the lender gives you all of the money at the beginning. You must generally pay it back in set or fixed amounts over a specific period of time. These loans may be used for a number of personal reasons, including making a large purchase, covering unexpected expenses, or consolidating existing debt.
These loans can range in size from several hundred dollars to several thousand dollars or more and their length can range from a few months to several years. The payments are generally the same throughout the length of the loan.
Applying for a personal installment loan
When applying for a personal installment loan, most lenders consider the following factors when determining the interest rate and terms of the loan:
- Your credit score and reports
- Income
- Debts
- Amount and length of the loan
- Interest rates permitted by state law
- Other factors, such as your bank account transactions
Interest rates for personal loans can either be fixed or adjustable. It’s important to understand whether there are other fees associated with your loan. Working with multiple lenders can also help you compare your options and find the best loan terms for your situation.
Missing a payment or failing to pay back your personal installment loan
If you’re unable to make a payment, contact your lender as soon as possible to understand your options. These may include deferment, forbearance, or a payment plan. These options could allow you to postpone your payments, make partial payments, or lower the interest on your loan.
If you miss a payment, your lender might use third-party debt collectors to try and collect the amount you agreed to repay. They also may report your payments to one or more of the three major credit reporting companies (Experian, Equifax, and TransUnion). Failing to make your payments on time can have a significant impact on your credit scores and report.