3 Types of Installment Loans You should be Aware about

There are two kinds of loans: installment loans or revolving loans. Almost each type of loans like car loans, mortgages, credit cards, student loans, personal loans etc. When it comes to getting your installment loan approved, lenders delve deep into your credit reports and financial health, then you borrow the money and pay it back with interest on a monthly basis or installments. Here are the types of installment loans.

  1. Mortgage

If you are making a 20 percent down payment and you don’t have amount left for other debt, then you need to seek a home that doesn’t cost more than three or five times of your monthly salary. There are many mortgage calculators online to check the same. It is similar to a car loan, the ideal way to know your affordability by getting prequalified for a mortgage. Seek a reputable mortgage banker to review your information like your income, savings, and investments so as to let them figure the amount to be lent to you. This is the amount you should aim at when looking for homes.

  1. Auto loan

When it comes to buying used or a new car from a dealership, the first thing is to get prequalified for the loan. This determines what you can afford to spend on a car and what your monthly expenses may look like. Ensure to do your due diligence before approaching a dealership. Shortlist at least two vehicles, check the price range, reliability as well as the insurance cost of each. After you decide what car to buy, seek a dealership that will fulfil your demands at a fair price and then test drive your car. When it comes to signing on the paperwork, ensure that the purchase agreement aligns with what you have agreed on with the salesperson.

  1. Student loan

Federal loans and private loans are two types of student loans to apply for. To apply for the former, FAFSA or Free Application for Federal Student Aid must be completed. This can be accomplished online easily. Many of these loans are based on needs, so always have your info handy like SSN, tax returns, driver’ license etc. The FAFSA also keeps you apprised on if you are qualified for any federal grants or scholarships. If there is any gap in your financing after the FAFSA, go for private loans. But note that these loans have higher interest rates than federal loans, so be careful what you choose.

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