Unlike revolving debt, such as credit cards, installment loans have fixed interest rates and predetermined monthly payments. They can help you achieve various financial goals and improve your credit score. However, they differ from credit cards and home equity lines, revolving credit products with flexible terms.
Lower Interest Rates
Having a mix of credit products is important when building your credit score. This includes both revolving credit and installment debt. Credit utilization is one of the biggest factors in your credit score, and a larger balance on your credit card can impact this negatively. However, having an installment loan can help improve your credit score by lowering your overall credit utilization rate. Installment loans can be used for various purposes, including debt consolidation and covering sudden expenses. They typically have fixed payments and a defined payoff date, which can be helpful for budgeting and providing peace of mind that the loan will be paid off on time. Generally, they also offer lower interest rates than credit cards do. This can make a big difference in the long term, especially regarding your bottom line. Personal loans from Maxlend and other companies offer repayment options with monthly payments that are easy to manage and can help you improve your credit score.
Predictable Payments
Unlike credit cards or a credit line, installment loans like MaxLend loans provide a lump sum amount you must repay over the loan term in EMI payments. This makes it easier for borrowers to plan their budget and ensure they can afford the debt repayments. Lenders tend to favor this debt over revolving credit because consistent and timely repayments can boost your credit scores. However, some customers may need help understanding the difference between these borrowing options and might choose a payday loan or open-ended credit card for their needs. This is where you can step in and educate them on the benefits of an installment loan. This will help them pick a payment option that’s better for them and make them happier.
No Collateral
Personal installment loans do not require you to put up collateral to receive funding. This makes them an ideal choice for people who may need to pay off large expenses, such as a medical procedure not covered by insurance or a costly car repair. With an installment loan, your credit score and financial history determine whether or not you can qualify for a specific amount, loan terms and interest rates. However, if you do not qualify, an alternative financing option may be available.
Consolidate Your Debt
If you have a high debt from credit cards and other loans, consider a personal installment loan or home equity loan for debt consolidation. Since they are unsecured loans, you can apply for them without putting up any security, and their interest rates are typically cheaper than those of credit cards. Another advantage of debt consolidation is that it typically results in a lower, more manageable monthly payment. Plus, it can help you stop paying unnecessary fees and interest and break the debt cycle. You’ll also find that your credit score will often improve as you make on-time payments to your new installment loan. However, it’s important to understand the differences between an installment and a revolving credit account before applying for one.
