Grace Enfield, Content Writer
@grace_enfield
An installment loan is good to have because it can help you build credit and it can be used for many different things, like home improvements or buying a car. Installment loans also can help you spread out the cost of a large expense over time, with repayment periods as long as 30 years depending on the type of loan you get.
Why an Installment Loan is Good
Can help you build credit
If you make your payments on time, the lender will report positive information to the credit bureaus. This means your credit score will increase, assuming negative information from other sources isn’t added. Additionally, since your credit score is partially based on the types of accounts you own, your score will get a boost if you have a healthy mix of installment and revolving credit.
To see how an installment loan might affect your credit score, check out the free credit score simulator on WalletHub.
Has many purposes
There are a number of ways you can use an installment loan, such as financing home improvements, consolidating debt or paying for expensive purchases over time. Some installment loans have a specific purpose, though, like car loans only being used to finance the purchase of a new or used car.
Offers long repayment periods
Depending on the type of installment loan, you could get a repayment period lasting years or even decades. This gives you plenty of time to repay what you owe.
Can be paid off early
Most lenders will let you pay off your installment loan early, often without penalty. This could save you money on interest.
Has predictable payments
Installment loan payments are typically made in equal amounts on the same day every month. This makes it easy to plan for these payments in your monthly budget.
Now that you know why an installment loan is good, you can start comparing your options. To see the top-ranked offers, check out WalletHub’s picks for the best installment loans. You can also estimate your personal installment loan rates with our free pre-qualification tool.
People also ask
Why are installment loans bad?
Some people think installment loans are bad because they only allow you to borrow once, they sometimes require collateral and they often charge fees. Installment loans can also hurt your credit score if the lender does a hard inquiry into your credit history when you apply and if you don't make your monthly payments on time.
Why Some People Think Installment Loans Are Bad
- Installment loans only allow you to borrow one time....
Are installment loans worth it?
Installment loans are worth it if the APRs, payoff periods and loan amounts are better than what your other options offer. Additionally, you should consider getting an installment loan only if you know you can pay it off on time and if your expense is necessary.
When Installment Loans Are Worth It
If other options aren't better
If you have good or excellent credit, you may be able to get a better...
read full answerDo installment loans hurt your credit?
Installment loans can hurt your credit score if you do not pay on time, since the lender will report negative information to the credit bureaus. The hard inquiry into your credit history and the increase to your overall debt load when you first get an installment loan may also hurt your credit score initially.
On the other hand, if you make the monthly payments on time and stay current on the loan, the lender will...
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