Grace Enfield, Content Writer
@grace_enfield
Installment loans are worth it if you need to pay off a large purchase over time and the interest rate, payoff period, and loan amount are better than other options. You should consider getting an installment loan only if your expense is necessary and you know you can pay it off on time.
When Installment Loans Are Worth It
If there is no better option
If you have good or excellent credit, you may be able to get a better APR on an installment loan than a credit card. But plenty of credit cards offer 0% introductory APRs, so if you need to make a relatively small purchase that you can pay off before the regular APR takes effect, a credit card may be better for you.
You may also be able to get a loan from a friend or family member. They could offer you more flexible terms than a major lender would.
If you know you can pay it off
Installment loans can take anywhere from a few months to 30 years to pay off, depending on the type of installment loan. You need to make sure that you can afford your monthly loan payments, along with other monthly expenses.
If you choose to get a personal loan, you can see how much your monthly payments will be with the free personal loan calculator on WalletHub.
If the expense is necessary
You may be able to use an installment loan to pay for things like a wedding or vacation. But it's better to use money you've already saved to pay for luxuries.
Installment loans can also be used for many necessary purposes, from financing home improvements to consolidating debt to paying medical bills. Some installment loans have a specific purpose, too. For example, you can only use an auto loan to finance the purchase of a new or used car.
Bottom Line
In the end, an installment loan is worth it if the interest rate and fees are better than the alternatives and if you can afford to make monthly payments. To see some of the top-ranked offers, check out WalletHub's picks for the best installment loans. Then, you can estimate your rates from multiple lenders with the free pre-qualification tool on WalletHub.
People also ask
How long do installment loans stay on your credit report?
Installment loans will stay on your credit report for up to 10 years after the account is closed. If the account is closed due to nonpayment, it will stay on your credit report for up to 7 years from when the lender reported the delinquency, while accounts closed in good standing will stay on your report for up to 10 years.
How Long Installment Loans Will Stay on Your Credit Report
| ... | Length of Time on Credit Report |
What type of installment loan is best to build credit?
The best type of installment loan to build credit is a credit-builder loan because lenders report payment information to the major credit bureaus each month, and there is no risk involved for the lender, so you’ll typically qualify for a low rate. Other good options include secured loans such as auto loans and personal loans.
Credit-builder loans allow you to build your credit and collect the funds once the loan is paid off, and the reduced risk for...
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