Smart Ways to Use an Installment Loan

ELIZABETH S. | April 8, 2024

While we might not like to admit it, we rarely have the funds readily available to pay for large expenses upfront. And sometimes, certain things we want to do just need to become a priority. So, what do you do when you don’t have cash on hand to fund something like home improvements, buying a new car, or paying for college? In most cases, you seek out an installment loan.

You can use an installment loan for various purposes. It’s not just limited to the examples we shared above. Many use an installment loan to consolidate their debts into one manageable monthly payment. This helps simplify their finances and offers a way to reduce monthly payments or even the total interest paid over time. 

The cool thing about Installment loans is that they fit so many different financial needs. They’re a lucrative option for anyone looking to manage their money more efficiently without the strain of high down payments or other upfront costs.

Client agreeing on an installment loan

What is an Installment Loan? What are the Different Types of Installment Loans?

The easiest way to define an installment is to say that this type of loan is taken out for a set amount and has a pre-determined minimum monthly payment due each month until the loan is paid off. 

Installment loans are structured to allow borrowers to pay back borrowed funds over a longer period, typically involving larger sums of money than short-term loans. When you take out an installment loan, you agree to a fixed payment schedule. This means you will have a predetermined monthly payment amount that must be made by a specific date each month, and this payment will continue until the entire loan amount, along with any accrued interest, is fully repaid. 

This structured payback period allows for better budget management since the repayment amounts are predictable and consistent throughout the life of the loan. The terms of these loans can vary widely, from a few months to several years, depending on the type of loan and the amount borrowed.

Common Types of Installment Loans 

When discussing the types of installment loans, it's important to know that they provide borrowers with a lot of options. Here are some of the most common types:

  • Mortgage Loans: These are used to purchase real estate. The property itself secures the loan, and the repayment period typically spans from 15 to 30 years.
  • Auto Loans: Borrowers use these to buy new or used vehicles. The car is collateral for the loan, which usually has two to seven years of repayment.
  • Student Loans: These loans are designed to help students cover the cost of higher education, including tuition, room, board, and books. Repayment often starts after the student graduates or leaves school.
  • Personal or General Purpose Loans: These can be used for various purposes, such as consolidating debt, funding home improvements, or paying for unanticipated expenses. Personal loans don't usually require collateral, and the repayment terms can vary based on the loan agreement.

Stethoscope on money, representing an installment loan

What Should You Use an Installment Loan For?

First and foremost, if you are considering an installment loan, you need to ensure you can follow through with the loan obligations. Most importantly, you must ensure you can make your monthly payments on the loan without jeopardizing payments on other debts you might have.

For example, if you take out an installment loan and your monthly payment is $300, make sure you have enough incremental funds in your monthly cash flow to make that payment. If you do not and miss a payment on this loan, a credit card payment, or another debt, that behavior may be reported to the credit bureaus. Missed payments can stay on your credit report for a long time and can cause serious damage to your score.

So, this all said, what should you use an installment loan for? Here are some of the most common installment loan uses:

  • Medical Expenses: Covering the cost of medical treatments, surgeries, or emergency healthcare not covered by insurance.
  • Home/Auto/Property Repairs: Addressing damages from accidents, natural disasters, or urgent maintenance needs that can't be delayed.
  • Securing More Flexibility in Short Term: Providing a buffer during unexpected financial hardships, such as sudden job loss or emergency expenses, allowing you to manage your finances more flexibly until stability is regained.
  • Borrowing Against Assets During Unemployment: Using assets as collateral to cover living expenses or maintain financial obligations during a job search can offer a temporary financial lifeline.

Cash Store Offers Installment Loans

When determining the right installment loan for you, do your homework. Pay attention to the fine print and ensure you meet the listed terms and conditions. If you can’t, postponing the purchase until you have mastered your finances is best.

At Cash Store, we offer installment loans to help you cover big expenses. To get started, complete our pre-qualification application. After we receive your information, we’ll let you know your options. 

The content on this page provides general consumer information or tips. It is not financial advice or guidance. Each person’s circumstances are unique. The Cash Store may update this information periodically. This information may also include links or references to third-party resources or content. We do not endorse the third-party or guarantee the accuracy of this third-party information. There may be other resources that also serve your needs.

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