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Personal loans and installment loans have taken over as the leading form of consumer debt, and the market grew 11.9% between 2017 and 2018.

It makes sense as incomes aren’t keeping up with increases in health care costs and basic expenses. When you have a family to support and a home to maintain, your budget is as tight as ever.

There are many benefits of installment loans that homeowners can take advantage of. You could even wind up in a stronger financial position.

There are many benefits of installment loans that homeowners can take advantage of. You could even wind up in a stronger financial position.

Read on to learn the top reasons why you should consider getting an installment loan.

What Is an Installment Loan?

An installment loan is a form of consumer debt where you pay the loan back in fixed installment payments. The installment payments are usually on a monthly basis, and they combine the principle and interest in one payment.

These loans can either be secured or unsecured loans. Unsecured installment loans usually come at a higher interest rate (but still lower than credit cards) and aren’t backed by collateral. If you don’t make your loan payments on time, your credit gets damaged and

On the other hand, a secured installment loan is guaranteed by some form of property. A home loan is an example of a secured loan because it’s guaranteed by your home. If you fail to make your payments, the bank can seize your home.

Now, let’s get to why you want to take out installment loans.

1. Lower Interest Rates Than Credit Cards

The average interest rate of a credit card hovers at around 15%. Compare that to personal loans. According to the Federal Reserve, the average interest rate on a 24-month personal loan is 9%.

That alone can present significant savings for you. Some lenders will lower your interest rate if you agree to enroll in autopay, which ensures that you pay on time.

The interest rate that you get for a personal loan will largely depend on your credit score. A higher credit score will result in a lower interest rate.

2. Predictable Monthly Payments

In the "pros of installment loans" column, you want to note that you can pay your loan back in predictable monthly payments. It makes budgeting much easier because you know that you can

Sure, credit card payments are predictable if you only pay the minimum payment each month. Depending on the amount of debt and interest rate, it could take 10 years or more just to pay off your credit card.

3. Improve Your Credit Score

Installment loans have the power to hurt and improve your credit score. This is why you need to tread carefully. You'll have to have a hard credit check done to get approved for the loan. This will cause your score to dip by a few points. 

If you don't make payments on time or you miss payments, you can do serious damage to your credit score. It can take years to get your score back up. 

On the other hand, when you make your payments on time, you show that you use credit responsibly and your score will increase. 

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4. Take Care of Emergency Repairs

You’re in the middle of a heatwave and your HVAC unit goes out. Your home is sweltering and you can’t get any relief from the heat. A new HVAC unit will run thousands of dollars that you don't have right now. 

You can get an installment loan to finance the new HVAC unit. Within a week, you can have a brand-new unit installed in your home. 

5. Get Cash Quickly

Installment loans that are personal loans let you get cash fast. Most lenders will check your credit on the spot and deposit the cash in a few days.

That’s not always the case with installment loans. Larger loans like home loans will have a lengthy process because lenders want to be sure you can pay the loan back.

6. You Don’t Need a Perfect Credit Score

Another advantage of installment loans is that you don’t have to have a perfect credit score to get one. You can find lenders that specialize in personal loans for people with bad credit.

Of course, it’s much easier to get a loan with a good credit score, and you’ll get a better interest rate. However, if you need cash now, an installment loan may be the answer.

7. More Cash Flow

Cash flow is hard to come by, even in a strong economy. An installment loan can give you some much-needed breathing room and improve your cash flow.

One of the best ways to use an installment loan is to put it towards something that will bring a return on investment. You could use one to start a new business or a home project that will increase the value of your home.

8. Lower Monthly Payments (With a Catch)

You learned earlier that paying the minimum payments on the credit card could mean years of payments until the debt is paid off. If you want to pay off your credit cards, you need to make large monthly payments each month.

That’s not the case with installment loans. You can usually pay them back in low monthly payments.

The catch is that if you do extend the life of your loan, you’ll pay more interest in the long run. If you borrow $1,000 with an 8% interest rate and pay it in 36 months, you’ll pay about $128 in interest over the life of the loan. Your monthly payments will be about $31 a month.

Now, if you extend the loan to 60 months, you’ll pay about $20 a month. You’ll also pay about $216 in interest. You can only imagine what that will look like with larger loan amounts.

The Many Benefits of Installment Loans

No one likes to take on more debt. Installment loans make it easier to take on a little debt and get financial relief. There are many more benefits of installment loans.

You can improve your credit score, get a major home project done, or leverage the loan to improve your cash flow. You have to make sure that you carefully read the terms of the loan and repay the loan on time to reap all of the benefits of an installment loan.

Otherwise, you could cause more damage to your financial situation instead of improving it. For more news on financial issues, be sure to check out the Economic Justice section of this site.