What Are Installment Loans?

Each person strives for the maximum satisfaction of his needs and surrounding himself with all the best and practical things. This applies to both repairs and any purchases. But not everyone can afford to upgrade their wardrobe or buy a new phone for cash. This is what installment loans are invented for. They are designed to make our life easier, and to enable us to buy a little more than we can afford right now.

Let’s look at the loans overview. A loan is targeted financing of a bank for the purchase of a particular product using borrowed funds at a certain interest and for a specified period. That is, the bank pays for your purchase in full, and you return the money to it taking into account the interest rate set at the time of signing the loan agreement.

What are installment loans? The concept of an installment loan is somewhat different — it is a purchase method in which the store provides the buyer with the opportunity to pay for the goods in equal installments, without additional payments for several months. That is, the store, in order to increase the demand for its goods, allows the buyer to repay the debt for the goods in small parts.

What are considered installment loans?


It is the transfer of goods or money by the lender to the borrower for free use. The basis of the procedure is a legal agreement that prescribes the rights and obligations of the parties and guarantees compliance with the prescribed conditions. In contrast to the essentially similar storage agreement, the loans services offer the right to use the received thing or money on condition of return in the received quality and quantity. 

Basic terms of installment loans: what are they:

  • The subject of the contract can only be a product, service or a certain type of work;
  • The purchase price is divided into several payments and cannot exceed the price of the product;
  • There is no cash remuneration in the form of regular interest charges;
  • The buyer is forced to make a down payment;
  • The deal is closed within half an hour due to the minimum requirements for clients with  online application presented;
  • The term of the contract usually does not exceed one year, but sometimes it reaches 18 months;
  • The frequency of payments to pay off debt can be a week or a month.

The main rule is to always make a contribution on time. Otherwise, you will have to pay late fees, which is not very pleasant and very expensive. Late fees are calculated as a percentage of the amount of untimely fulfilled monetary obligation and is taken for each day of delay in payment.

 Types of installment loans: what are they?

There are two main Installment types: interest-free and with interest. The first option is more profitable for the buyer due to the absence of commissions and markups. You can place an application directly on the website or in the sales area of the store. If the transaction is made through a bank, the financial institution may impose additional service charges. The installment plan option is available in many banking institutions that have extensive partner store networks.

The creation of a credit history begins with the signing of the first loan or loan agreement, purchase in installments or opening a credit card. Sometimes, a lack of credit history is worse than an installment loan for bad credit, because in such a situation the bank has no idea about the client’s financial situation. How to achieve good creditworthiness in a few steps:

  • All obligations should be paid on time.
  • You need to follow your history on a regular basis, and not just when it’s time to take a new loan. 
  • Don’t be anonymous. You can use small goods loans or get a credit card.

If the client has forgotten about the due date of the debt or took out a cash loan, which cannot be repaid, it should be remembered that a bad credit history is not a sentence. Everyone can improve their creditworthiness at any time, and if you need extra money now, do not forget that there are non-banking organizations in the market that are ready to issue installment loans for bad credit history.


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