5 ways installment loans can help you manage unexpected expenses
If you’re seeking to pay off debt or fund a big purchase, an installment loan might be worth looking into. Unlike revolving credit like credit cards, installment loans often feature consistent, dependable monthly payments.
This allows you to factor them into your budget more easily. Consistent, on-time loan payments also help build your credit score. However, shopping around and prequalifying for the best loan terms and rates is important.
Save up
Saving up to cover unexpected expenses can be a good way to avoid debt. You can save by reducing your spending on things you don’t need or by setting savings goals like saving for a vacation or emergency fund.
Alternatively, you can consider an installment loans option such as MaxLend installment loans, which offer predictable monthly payments and fixed interest rates. This can be easier to budget than revolving credit options like credit cards and home equity lines. Many lenders provide fixed-rate installment loans for home and car purchases and personal and student debt. Your creditworthiness will determine the type of loan you can acquire, so raising your score before applying might help you be eligible for a cheaper rate. Also, ensure you know of any prepayment penalties on your installment loan before taking out one.
Sell some assets
Installment loans are one of the most common forms of financing, and they can help you finance a wide range of large expenses. They’re typically offered in lump sums, and borrowers repay the balance over a set period with fixed monthly payments. This category includes personal, mortgage, auto, and student loans. Selling valuable assets might be a great strategy to get extra money quickly if you have any. Of course, you should always save up and use your emergency fund before selling any assets. But this can be an effective and relatively safe solution if you have no choice.
Be proactive
Sometimes unexpected expenses arise even with a strong savings plan and budget. For example, a broken car or medical bill can knock your finances off balance. With installment loans, you can easily access funds for urgent needs without putting up assets as collateral. The lender may also offer flexible repayment terms and affordable interest rates. Some lenders even work with borrowers who have thin credit or no credit. Borrowing with an installment loan can help build your credit if you make timely payments. However, this will depend on your lender and how they report to the major credit bureaus. A late payment could hurt your credit scores. Use financial apps and reminders to stay on top of your expenses and prevent late fees.
Make a plan
Having a plan can make or break your ability to handle unexpected expenses. You can build up an emergency savings account, take on a side gig or sell assets you don’t regularly use to bring in some extra cash.
Another way to prepare for the unexpected is to establish a budget considering irregular expenses like property taxes, insurance premiums and car maintenance costs. You can also use a loan to pay for these expenses without risking dipping into your emergency fund. Installment loans allow you to borrow a set amount that is paid back on a fixed schedule over time. This helps you manage your debt better and improves your credit utilization ratio, up to 35% of your credit score.
Borrow
An installment loan is a way to borrow and pay money back over a set period. Depending on the lender and loan amount, it can come with fixed or variable interest rates and various terms. Some installment loans, like mortgages or auto loans, are secured, while others are unsecured, such as personal loans or credit cards. Both types of borrowing come with pros and cons. For example, your credit scores may take a hit if you miss payments. However, your credit scores can benefit if you consistently make timely payments. Another consideration is the amount of debt you can comfortably repay. Borrowing what you need and checking your credit score before applying for any loan is important.
