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Home » Business » Pros and Cons of Having an Installment Loans

Pros and Cons of Having an Installment Loans

Muhammad Zeshan Sarwar Business 39 Leave a Comment

Business owners and entrepreneurs have become more innovative especially regarding payment terms. To encourage more customers to buy their products or services, they offer various installment loans. Not only does it serve as a marketing strategy, but installment loans also make it more convenient for customers to complete the payment of what they have bought.

However, do installment loans bring you more benefits or liabilities? Find out in this blog the pros and cons of installment loans.

Advantages

  1. Easy Application – regardless of the financial state, applying for installment loans is easy because you do not need to pay the entire amount right away. You just need to give an initial payment and you can have the item you bought.
  2. Easy to Manage – especially for fixed-term rates, installment loans are easy to manage because you can complete the payments without hurting your savings very much. Plus, because it is in terms, you have more opportunity to produce the payment from different sources.
  3. Can Maximize Cash – If you are financially wise, installment loans do not require you to use a large sum of money. Hence, you can even earn from it by investing your budget, allowed for the purchase, in stocks, mutual fund, and other financial instruments. Thus, your money can work even at the expense of a loan.
  4. May Boost your Credit Rating – by engaging in installment loans, you have the opportunity of increasing your credit rating by just strictly following the payment terms. In some cases, lenders allow you to pay in advance to complete the loan and apply for another.

Disadvantages

  1. May Hurt your Credit Rating – this only happens when you missed a due date or worse when you purposely avoid paying your loan.
  2. Increasing Interest Rates – although installment loans do not require you to release large amounts of money at the initial payment, the amount you pay within the terms may be increasing. In other words, it does not hit you big time, but if you’re not aware, it kills you gradually.
  3. Advance Payment Consequence – it appears that lenders earn more from installment loans due to interest rates. As a result, you might want to pay it immediately when you earn the money to pay completely. However, some lenders will include the supposed interest imposed during the terms of the loan.

Decision-making

It appears that you are trapped in a deadlock. It seems that installment loans have more pros than the cons. However, the cons seem to equate the pros due to the impact it might cause in your financial standing. To help you answer this question, consider the following scenarios:

If your loan is for business purposes, it is more appropriate to choose installment loans because the business will be the one to provide for the payment you need. This won’t hurt you much because it is the bank’s money that you are using to finance your business. It is as if you earned without hurting your savings.

But if you’re buying items or services that won’t make you earn money, might as well pay it in full right away. In other words, use your own money. After all, you have to reward yourself. With this, you saved yourself from the interest rates and you were able to buy the things that you need at a much cheaper price.

Generalizations

Installment loans may have its advantages and disadvantages. But all of these may depend on your situation. The core of the matter is you have to be financially wise. Use your money wisely by making it work for you rather than you working for it because you have been overwhelmed with loans.

Muhammad Zeshan Sarwar

About Muhammad Zeshan Sarwar

I am a tech enthusiast working in the Mobile industry since 2012. Reporting technological innovations is my passion. Being a reporter, I always try to break stories in the industry.

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