Is a student loan considered an installment loan? What kind of loans are installment loans? Auto? Home? Other?
Thank you for your question about installment loans.
There are many different types of loans and credits, including installment loans. Although mortgage loans, student loans, and auto loans can be referred to as installment loans, it is very common to refer to smaller loans such as payday loans, debt consolidation loans, or retail purchase loans as installment loans. Whenever you shop for a loan, make sure that you understand the terms of the loan including the interest rate, the fees (upfront, monthly and/or, special fees), the repayment dates and sums, and the consequences of not meeting a payment.
In order to help you find the installment loan that best suits financial situation, learn about:
Your lender sets up with you terms to repay your personal loans. This includes repaying the principal, interest and fees associated with the loan. Repayment schedules vary greatly, but the two main types are installment and revolving payments.
Installment loans have a variety of payment plans. The monthly payments will vary depending on these variables:
Student Loans are definitely a type of installment loans, although they have special payment terms. Most student loans have a deferment option while you are in school. Afterwards, your accumulated interest is added to your principal, and repaid in monthly installments. Federal student loans have more options including forbearance (you can push off payments) and income based repayment schedules.
Here are a few examples of installment loan payments:
|Loan||Amount||Length (Months)||Interest Rate||Monthly Payment|
|Federal Unsubsidized Student Loan||$15,000||120||6.80%||$399|
|Installment Computer Purchase||$500||40||29.99%||$20 (except last payment of $15)|
One other type of installment loan is an online installment loan, or an online payday installment loans. Payday loans are offered for short terms (usually for up to a month) and are paid back from a direct payment through your bank account. They come with high fees. Depending on your state’s regulations, some payday loan or cash advance loans are available for up to 4 months, paid back in monthly installments. These loans are very expensive! They come with very high fees, typically about $20 for every $100 borrowed, and that is for a very short term. That means that you don’t pay an annual interest fee of 20%, rather your real cost of money is closer to 300% p.a.
Installment loans, if use wisely, can help you get an education, buy a car, buy a house, or purchase a large appliance. If used incorrectly, then you can get into a financial mess, missing payments, which will harm your credit score and possibly lead to collection calls and lawsuits.