An instalment loan is a type of debt that is repayable over a set number of equal instalments within a predetermined time period. It is the opposite of revolving loan, whereby the borrower can either pay off the balance in full, or pay the minimum amount each month. An instalment loan has a definite end, so long as the borrower pays the agreed instalment amount every pay date, while a revolving loan does not end, and the account holder can borrow again and again so long as the credit limit is not maximized.
With instalment loans, the individual’s credit is assessed and is given a borrowing limit which can be used instantly. The borrower will be given a fixed interest rate or APR and the total amount to be repaid will be calculated and divided into equal instalments. Other factors that could affect the interest rate are the duration of the loan, and the value of collateral, if present.
Meanwhile, with a revolving loan, the individual can borrow against the given credit limit. The amount can be paid off in full on the next due date, but the individual also has the choice to pay only the minimum amount required so that the debt won’t earn interest. While this would allow the borrower to postpone payment without paying late charges, this can actually cause more trouble, as it takes longer time before the debt can be erased.
Unlike revolving loans, an instalment loan account simply closes after the borrower has provided payment in full. This means you’ll be free of debt and responsibility sooner, as long as you make payments on time. There’s no need for setup fees or annual membership fees for the said account.
Another benefit of instalment loans is the scheduled payments. This means you will know exactly when and how much to pay, letting you plan your budget accordingly. This will give you more control as to how much you can afford to spend in every scheduled repayment.
The only downside with instalment loans is that the borrower has to reapply again after the loan has ended. However, if you are an existing customer and have established good payment behaviour, you may not need to resubmit your requirements and may be eligible to borrow more.
We are well aware of the dangers associated with using credit cards and other revolving types of credit, and we never want you to struggle with unpredictable circumstances that might eventually lead to bad debt. We are here to help you find suitable doorstep loans with simple instalment options that you can afford. Just click back on our homepage to get started.