advantages and disadvantages of installment of loans
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Answer:
Explanation:
With installment credit, you are provided a set monthly repayment amount for a stated period of time, making budgeting easier. Installment loans can also be extended over time, allowing for lower monthly payments that may align better with your monthly cash flow needs Due to quick delivery of cash and easy approval, installment loans are getting very popular among people. You can also apply for an installment loan via an online source and can get approval after completion of documentation process. Extra charges and high interest rates are some cons of installment loans. Installment lenders also do not allow borrowers to make prepayment of loans. A hidden charge on installment loan is also a worse disadvantage of installment loans.
3. As installment loans have large number of benefits similarly, it has some drawbacks and this slide show has been represented both advantages and disadvantages of installment loans.
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Explanation:
Disadvantages of an Installment Loan
An installment loan is a borrowed amount of money that is received in a lump sum and must be paid back over a period of time on a set schedule by a specified date. The specifics of installment loans make them disadvantageous when compared to alternatives.
Fixed Interest Rate vs. Variable Interest Rate
Most installment loans have fixed interest rates. Fixed interest rates are usually higher than initial variable interest rates. Fixed interest rates do not respond to the market and can therefore remain high even if the market rate decreases. Getting stuck in a fixed interest rate installment loan can force you to continue to pay high rates even though low rates exist.
Unforgivable Conditions
The terms of an installment loan are negotiated before closing and must be stuck to. There is no renegotiating if a borrower’s situation changes. The schedule, interest rate, and term are permanent can must be met unless a borrower is willing to face default. Because most installment loans are secured, default can mean losing a valuable asset or being required to pay the entire amount of the loan in one payment.
Advantages of an Installment Loan
An installment loan is a borrowed amount of money that must be paid back over a contracted period of time in regular, usually monthly, payments. Although there are alternatives to installment loans, such as payday loans, the advantages of installment loans make them appealing to many people.
Reliable Interest Rates Mean Predictable Monthly Payments
Installment loans have fixed interest rates for the life of the loan. Fixed interest rates are appealing because a borrower does not need to worry about an increasing interest rate resulting in a substantially greater monthly payment. Borrowers know what to expect each pay period.
Longer Terms Mean Lower Monthly Payments
Installment loans generally fall in the long term range. A longer amortization, such as 15 years, means that each month’s payments will be low and easy to make.
Speed Gets Borrower’s Money Fast
It will not take more than two weeks to get money from an installment loan. A borrower can receive money in as fast as two days after the filing of an application. Requirements for an installment loan are relatively loose and lenders do not demand a lot of documentation. As a result, processing time is quick. Borrowers receive a lump sum of cash immediately following closing.