If you’re familiar with loan products, you’ll notice that they frequently have several names for the same thing. For example, “payday loans” may be referred to as a “short-term loan,” a “personal loan,” a “term loan,” or simply a “loan” by some.
The same can be said with installment loans. An installment loan is also known as a “personal loan,” a “term loan,” and, in some situations, a “short-term loan.”
So, what distinguishes an installment loan from a payday loan? And what is the relationship between installment loans and business loans?
Let’s look into these and other issues.
What exactly is an installment loan?
An installment loan is a loan that gives the borrower a large sum of money up front that must be returned in installments over the course of a set period of time.
As a result, an installment loan is often known as a term loan. If the term is short (usually only a few months), it may even be called a short-term loan. Most installment loans, on the other hand, are for greater sums and are returned over a period of months or years. Generally, the longer the repayment term, the greater the loan amount.
How does an installment loan work?
Installment loans are typically repaid in monthly installments. Payments are usually made once a month and go toward a portion of the principal borrowed plus interest on the loan. Most installment loans allow you to pay more than the minimum monthly payment, with the extra payments amount applied to the debt.
What loan amounts are possible through installment loans?
The amount a borrower can obtain with an installment loan is determined by a variety of criteria, including the amount offered by the lender and the borrower’s credit rating. Installment loans are typically for higher sums than single-payment “payday loans” and other popular short-term loans. Amounts ranging from the hundreds of dollars (for consumers) to hundreds of thousands of dollars (for enterprises) are typical. It all relies on the type of installment loan and the creditworthiness of the applicant.
Is a personal loan considered an installment loan?
It is possible. A personal loan is essentially any loan made for personal consumption rather than commercial purpose for a firm. While some persons and businesses refer to their installment loans as personal loans, not all personal loans are installment loans – nor are all types of installment loans personal loans!
Are small business financing installment loans?
There are other sorts of small business funding, but the term “small business loan” usually refers to an upfront quantity of money granted by a lender and returned over a set period of time. So, sure, the term “small business loan” most frequently refers to an installment loan geared toward enterprises rather than consumers.