What is an Installment Personal Loan?

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 In General

Personal loans could range from various types. While some personal loans are ideal for meeting a short-term liquidity crisis, others are best for meeting a significant cash crunch. Installment loans are usually long-term multi-payment loans which are paid over a period of time in a number of equal installments. Cashco Financial offers a version of installment loans that we call Flex Loans because of their flexibility to fit your needs. Flex Loans are consumer-friendly because they are consumer-built.

The amount that you have to pay per installment and the time horizon is usually predetermined at most lenders but with Cashco, it’s different. You choose your loan amount, you choose your loan terms, and you choose your loan installment payments. However, failure to pay the loan on time or skipping a monthly payment or rolling over the loan can change the equations. Other lenders often provide close-ended loans with a fixed time period for loan payment are considered to be an installment loan. The other type of personal loan which is also generally long-term is an open-ended loan with a revolving debt account. An example of this would be a line of credit. Cashco Flex Loans are open because we want to make things better for our clients. When you get a Flex Loan, it is open-ended so you can pay it off early. You can also top it up by borrowing more money as you need to. The choice is yours and Cashco is flexible to fit your needs.

Contribution to your credit score

 Although open-ended credit has the maximum influence on your final credit score, long-term installment loans, especially mortgage payments and auto loans, consumer durable loans, student loans or other installment loans can have a significant impact. Paying the bills on-time exhibits unwavering stability and lenders feel that you can be trusted with a loan in the future as well.    

 The bigger the loan amount and longer the tenor, the bigger will be the impact on the credit score. If you manage to make the scheduled payments on time without default, your credit score will steadily improve if your lender reports the payments to credit reporting agencies, which is what we do for you at Cashco Financial.

In order to avoid the risk of missing monthly deadlines, most people issue preauthorization orders to their banks which allow the lender to directly debit the monthly fees on the loan. However, the person has to maintain sufficient balance on that date.

In order to qualify for a long-term installment or term loan, you are expected to maintain a good credit score and also an acceptable debt-to-income ratio. You may also have to furnish proofs of your income and details of other lenders whom you owe, if any.

Pros of installment loans

  1. Easy to manage small installments: The single biggest advantage of an installment loan is that you can break down the big sum into small, manageable installments that don’t burn a huge hole into your pocket. You can make the payment in a staggered manner, that gives you time.
  2. Fixed payment: As you know the amount that you have to pay per installment in advance, you can better manage your finances. There are no sudden, unpleasant surprises and no sudden jump in your APR which remains fixed throughout the time horizon.
  3. It allows you to stay invested in high paying financial instruments: Since you decided to pay in small installments, you have to pay a small interest. But, you can divert the major portion of your savings every month to a money market or fixed income instrument that has a higher rate of return in the long run. In the long run, you earn more than you spend in interests.
  4. Lower cost of borrowing: The rate of interest is relatively lower since you are spreading the payment over a period of time.

 Cons of installment loans

  1. Stringent checks: Most lenders carry out stringent checks of your credit score, debt-to-income ratio, verifications of your income certificates, etc and the level of checking is much higher than in short-term loans and some revolving loans.
  2. Prepayment may not be allowed: Some lenders don’t encourage pre-closure of the loan even if you want to pay higher amounts per month and close the loan earlier. Some charge a penalty for pre-closure and some simply want you to pay the dues as per the predetermined terms of the loan. However, with a Cashco Flex Loan, you can pay it off early with no penalty! If you are able to pay off your loan more quickly than you thought, Cashco will let you with no problems or issues.

Conclusion

Installment loans are very user-friendly. They have a quick turnaround time and can be applied for online. There is clarity and predictability which makes it ideal for average Canadians. It is arguably the best type of loan (especially if your installment loan is a Flex Loan from Cashco Financial). Get one today!

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