What You Need To Know About Instalment Loans And Your Credit Score

What You Need To Know About Instalment Loans And Your Credit Score

You all might be familiar with a method of purchasing by paying the amount in instalments whether they be for 6 months, one year, or several years in the case of home loans, they are often in technical terms known as instalment loans. When a  loan is repaid over set no scheduled payments that type of contract is known as an instalment loan. Basically to repay a loan a fixed number of instalments are made that are to be paid within the desired timeline. This type of loan is most common nowadays, one need not pay the full payment, instead a small amount of downpayment is made, and after that the rest of the loan is often paid on monthly basis.

Beginning Of The Concept Of Instalment Loans

During the early 18th century it was observed in the United States, instalment selling of durable goods by a furniture store. During the next few years, such instalment plans were also used by other merchants for increasing their sales when a customer was not able to pay the principal amount for which he or she purchased the good, in that case, the merchants used to bring back the sold item and resale it, further not providing them with any more instalment purchasing.

Are Instalment Loans Good

Instalment loan can help one score if he or she pays on time. Most middle-class people are not able to pay huge amounts at once by dividing it into small parts, or instalments monthly they can afford and use resources without much waiting. In this, a buyer can use the commodity instantly and then pays the cost price on periodic payments freeing him or her from the unnecessary stress.

Are Installment Loans Bad?

The drawback of instalment loan is that the rate of interest and the amount to be paid back is largely based on the amount of credit one looks for, and on the duration to pay back. For example, if one buys a refrigerator and the instalments made are for the time period of one year and the same model of refrigerator is purchased by another person for the monthly instalments of six months. The rate of interest paid by the former will be more than that of the latter. This is so because the same amount is spread out for a whole year in the case of the former where the latter paid it in six months.

Careful usage of the concept of instalment loans can run a long way. Instalment loans provide laymen the advantage to use the latest technology easily without any more waiting by dividing the amount into periodic payments. On the other hand if the period of instalments to be paid is not calculated wisely then you might pay more than the required price.

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