7 Factors To Consider When Selecting an Installment Loan Lender
Installment loans are a great way of accessing cash that you can pay back over time. The extra time to pay gives you breathing room when handling emergency expenses, moving to a new location, or consolidating debt.
However, installment loan lenders vary widely in their practices. Some offer loans nationwide while others serve local customers. Lenders also vary in their loan terms, qualification criteria, and repayment timelines.
So how will you know that you've chosen the right lender to work with? Here are seven factors to consider.
1. Transparent Loan Terms
Transparency is critical when selecting a lender. Before accepting an offer, you should have access to detailed loan information, including the interest rates, monthly payments, and amortization schedule.
Transparency also builds trust between a lender and their customers. Therefore, rather than rushing you through the process, your lender should be willing to answer questions and clarify any confusing information.
2. Careful With Your Budget
When faced with an immediate expense, you may be tempted to borrow as much money as possible. However, any reputable lender will want to verify your ability to pay before offering a loan. This process involves evaluating your income versus expenses to advise you on the most reasonable amount you can borrow.
By verifying your income, the lender protects you from over-borrowing. The lender also protects themselves from default and lost revenue.
3. Reduce the Principal
Since installment loans are spread out over time, a portion of each payment should go towards reducing the principal. Interest-only payments may sound flexible for your budget, but you'll end up paying high amounts of interest over the life of the loan. Loans with interest-only payments are also designed for shorter periods and have a high risk of default.
When considering a lender, check the loan's amortization schedule. This schedule should break down how each payment is applied toward the interest and principal.
4. No Prepayment Penalties
Many reputable lenders won't penalize you for paying off the loan earlier than expected. Your lender should encourage on-time and early payments to help you save on interest.
While taking longer to pay and accruing interest may benefit the lender, it keeps you in debt and increases your risk of default. Therefore, reputable lenders will help you remain on top of your loan payments because when you succeed, they also succeed.
5. Flexible Loan Amounts
You can also evaluate an installment lender by checking their loan amounts. Lenders should offer a mix of high and low amounts, so you don't have to apply for money you don't need.
While getting access to a large loan is tempting, borrowing more than is necessary will throw off your budget and encourage overspending.
6. Payment Date Adjustments
Life happens, and you may not be able to meet payment deadlines. Consider lenders who offer payment date adjustments to help you navigate unexpected challenges.
For instance, if you face emergency expenses during a specific month, adjusting the pay date could give you extra time to pay without incurring penalties.
7. Credit Reporting
Paying an installment loan on time and in full could significantly boost your credit history. Therefore, consider lenders who report your loan activity to the credit bureaus every month. While there's a risk that negative activity, such as missed payments, may also be reported, careful preparation when choosing a supportive lender will go a long way toward improving your credit.
Remember that not all installment lenders are the same. Consider a lender who will prioritize your needs, protect you from high loan costs, and work within your budget.
At Ardmore Finance, we make the installment loan process easy by providing fully amortized loans. This means every payment will reduce the principal, and you can make affordable payments that are within your budget. Contact us to explore your options today.
