Online installment loans can be a simple, quick, and convenient option for when you’re short on cash. But does borrowing money make sense every time your wallet gets a little thin?
The short answer is no.
Online installment loans may help with financial problems of all kinds, but they play a special role in your finances when your savings dry up. Borrowing responsibility means knowing when to apply for online installment loans, and when to find another option.
What Are Installment Loans?
Generally speaking, many installment loans share the following basic qualities:
- You receive a pre-determined dollar amount in one lump sum
- You pay back the loan (plus interest and/or fees) over a series of fixed scheduled payments
We know, as definitions go, it’s a pretty loose one. It may be used to describe a variety of credit options, such as mortgages, auto loans, and student loans. There are even installment loans designed to help you cover business expenses and repairs.
With so many options, finding the right product for your needs is an important step in the borrowing process. You need to make sure the loan you’re applying for is not only designed for your expense but also your financial capabilities.
You wouldn’t apply for a mortgage when you need help buying a new car, after all. Nor should you take on an auto loan if you know you can’t afford its monthly payments.
Long- vs Short-Term Installment Loans
In this context, “term” indicates the length of time it takes you to repay the money you borrow.
What Are Long-Term Personal Installment Loans?
Long-term options tend to take several years — or even decades — to pay back in full.
Usually, a long-lasting repayment schedule coincides with a larger principal (which is the amount you borrow). An extended term breaks a larger sum of money into several smaller payments.
Due to their size, these larger loans often end up requiring collateral or a co-signer as a guarantee. Essentially, these details allow a lender to recoup the cost of the loan if you default — either by taking an asset you used as collateral or by asking for payments from your co-signer.
Examples of common long-term installment loans include:
Home Equity Loans: Something like the typical HELOC has a 10-year repayment period.[1]
Mortgages: The most popular amortization period is a 30-year, fixed rate mortgage.[2]
Student Loans: On average, grads with a bachelor’s degrees take 19.7 years to pay back their loans.[3]
What Are Short-Term Installment Loans?
Short-term options may take anywhere between a few weeks and a few years to repay, and they tend to have smaller borrowing limits.
Despite a smaller principal, your scheduled payments may be higher than long-term alternatives because there’s less time to repay what you owe.
These installment loans, like other small dollar personal loans, may be unsecured, which means you don’t provide collateral or a co-signer. To compensate, short-term installment loans tend to have higher, fixed interest rates.
What about Finding Installment Loans Online?
Borrowing in-person is so last century. It takes time to find your way to a brick-and-mortar location during business hours and patience to speak with a financial advisor about your options.
Nowadays, shopping for installment loans online takes the borrowing experience out of a stuffy lender’s office and onto your screen — whether it’s on a handheld device or desktop computer. You may shop around, apply, receive your funds, and pay it all back over the Internet.
As for MoneyKey installment loans, you may apply at any time you have to spare in your busy schedule. The application is available 24 hours a day, 7 days a week, and it can take only a few minutes to complete.
Sometime after you click submit, a Customer Care representative will touch base to verify your information. If you’re approved, you may receive your funds as a direct deposit to the account you supplied in your application as soon as the next business day.
While the process is partially digital, applying for installment loans online doesn’t change anything about the type of credit you receive.
You’ll still get your pre-set amount as a lump sum, and you’ll still repay your loan over a series of payments (or installments) according to a predetermined schedule. In many cases, these installments may coincide with your pay days. In some cases, this predetermined schedule may change, depending on whether you make larger payments to pay off your loan faster. Check with the lender you’re applying to if there are any penalties for pre-payments. If not, this may be a good way to pay off your loan more quickly and potentially save on interest.
When Should You Apply for Personal Installment Loans Online?
Taking out personal installment loans online may make sense if you need a little help covering a short-term financial problem. But what does that mean? Here are some common problems that may be solved by online installment loans:
Unexpected Medical Bills
Ongoing health care expenses are an important feature of any budget — whether you have a clean bill of health or if you suffer from a chronic illness.
If you can predict how often you have to pay for prescription medicines, dentist appointments, and physicals, setting aside cash with each paycheck may make it easier to afford these health expenses.
But not all medical bills are predictable. Accidents happen. While preparing dinner, you might cut yourself bad enough you need stitches. Between clinic fees, paid parking, and any antibiotics, your impromptu trip to the doctors may be expensive.
If your savings fall short of what you need, you may apply for an installment loan online to make up the difference.
Unanticipated Home Maintenance and Repairs
Eventually, many homeowners face an unexpected issue with their house. Whether it’s a leak in the roof that springs up after a record amount of rain or a broken furnace that no longer keeps your home warm and cozy — you can’t always put off the work until you have the cash.
In emergencies, getting an online installment loan may help you take care of your home, even if you have no room in your spending plan. But don’t give up on your household budget.
Thinking of a spending plan as a fixed document is one of these five budgeting myths we debunk here at MoneyKey. In reality, it’s a document that should adapt to your circumstances as they change.
Revisit it every time you run into an unexpected home expense to see if you can anticipate it better the next time it happens.
One general rule of thumb recommends saving one dollar per square foot every year for repairs and maintenance[4]. This gives you a good idea of your goals, although you may have to save more depending on the age and condition of your property.
Surprise Auto Repairs
It’s one thing to plan for regular tune-ups and other regular maintenance. But what if a nail punctures a tire or you cause a fender bender and want to pay out of pocket to protect your premiums?
Unexpected car trouble may be a reason to borrow personal installment loans online. If you have no savings to spare to cover these expenses, these online borrowing options may bridge the gap.
When Does Applying for Online Installment Loans Not Make Sense?
Getting installment loans online may not be a catch-all solution for every financial emergency. Here are some examples when you should avoid taking out personal installment loans online.
Debt Consolidation
While there are loans that may help you combine multiple debts under one large loan, you won’t find them with online installment loans. Generally speaking, you shouldn’t take out multiple installment loans online to pay off existing debt.
Regular, Fixed Expenses
Your regular, fixed expenses make up your most predictable bills and purchases. They arrive like clockwork — whether it’s weekly, monthly, or by some other consistent schedule. They also tend to cost the same amount each time they arrive.
Because you can anticipate how much they cost and their frequency, you should budget for these fixed expenses first.
If something makes it impossible to meet these obligations, taking out installment loans online may not be the right solution. The best online installment loans are used for unexpected emergency expenses only.
Discretionary Spending
Discretionary spending is any expense that isn’t tied to your immediate survival. It’s an item or service you can safely live without.
Discretionary spending often overlaps with fun expenses, or your financial wants. Things like takeout, video games, and tickets to a comedy show fall into this category. But it also includes those not-so-fun expenses, such as a gym membership you hardly use or wedding gifts for family you rarely see.
Generally speaking, you should not turn to installment loans online for any discretionary spending. Instead, be creative with how you may reduce these costs. Checking in with these cheap wedding gift ideas is a perfect example of managing your spending before you feel as though you need to borrow personal installment loans online.
Borrow Wisely
Getting installment loans may be helpful, but only under the right circumstances. When it comes to online loans, make sure you’re getting one only if you need help covering unexpected emergency expenses.
Be sure to shop around and compare your options. A little time researching may help you find the best online installment loans for your financial needs and capabilities. Whatever you choose, always make sure you can afford each and every scheduled installment. This trick will help you find an affordable option in your time of need.
Thinking about a MoneyKey Installment Loan? Check out these MoneyKey reviews to see what past customers have to say about us.
[1] https://www.cnbc.com/2018/05/21/5-things-to-know-before-taking-out-a-home-equity-loan.html
[2] https://www.investopedia.com/articles/personal-finance/051914/mortgage-amortization-strategies.asp
[3] https://www.credible.com/blog/statistics/average-time-to-repay-student-loans-statistics/
[4] https://www.thebalance.com/home-maintenance-budget-453820
