Pulling out your credit card to cover major expenses is convenient and fast, and if you don’t have cash in the bank, credit may seem like your only option. There is, however, another way to cover expenses.
An installment loan is a short-term personal loan with a fixed rate and set monthly payments. Unlike a payday loan, you can repay an installment loan over several months or years. The average borrower pays back the loan in 12 to 24 months and funds can be used for a variety of purposes.
If you’re not sure whether an installment loan is right for you, here are 10 things you can do with the loan.
Pay for medical expenses.
Whether you have a mountain of medical debt or you’re interested in cosmetic surgery, an installment loan can provide funds to cover medical expenses.
Debt consolidation.
Are you paying a high interest rate on your credit cards? Are you unable to keep up with multiple creditors and due dates? Apply for an installment loan and pay off your creditors with loan funds. Consolidation simplifies your finances by creating a single monthly payment.
Take a vacation.
Everyone needs a break, and with the help of an installment loan, you can take the trip of your dream.
Home improvements.
Boost your property value and improve your living space. Cash from an installment loan can go toward updating your kitchen and bathrooms, or perhaps a room addition. It can take years to save up for home projects, and while many home contractors offer financing, they don’t always offer desirable interest rates.
Used auto loan.
If you need a few thousand dollars to purchase an inexpensive, used automobile, an installment loan might be the answer. Pay off the loan is one or two years and avoid a five-year auto loan.
Pay for education.
Federal student loans are widely available, but government loans may not cover 100% of your education expenses. An installment loan is perfect for filling the gaps. Use funds to cover your tuition, rooming, supplies and other college-related expenses.
Startup capital.
Are you ready to be your own boss and call the shots? An installment loan can provide the push you need to get your venture off the ground. Funds can purchase supplies, advertisements and cover other expenses until your company generates revenue.
Improve your credit score.
If you only have one type of credit account – perhaps a credit card – adding an installment loan can increase your personal score. Diversification plays a role in credit scoring, accounting for 15% of your score.
Wedding expenses.
If you think that weddings are cheap, you probably haven’t had a son or daughter get married. From the venue to the photographer, planning a wedding can break the bank. Rather than drain your savings, apply for an installment loan and spread this expense over several months.
Personal electronics.
An installment loan may be the last thing on your mind when you’re ready to purchase a television or computer. These loans, however, typically offer better rates than your credit cards, thus saving you money on finance charges.