Short term installment loan is a common type of credit facility introduced by banking and finance organizations. The concept of repayment by installments forms the basis for the functioning of this credit provision. To know more about short term installment loans, read on.
A loan is a credit facility in which the lenders, i.e. banking and finance organizations, help the applicants by extending a sum of money, and charging an interest. An installment loan, as the very term suggests, is a loan which can be repaid in parts at regular intervals. Installment loans can be applied for with the help of online forms, that are available on the website of the lender. Once the form has been completed, it goes through the process of sanctioning. Then the sanctioned amount of loan is handed over to the borrower. Repayment of an installment loan implies that the total amount of loan, i.e. principal along with the payable interest is divided into equal parts and is repaid to the lender over a period of time at regular monthly intervals. Installment loans are classified into different types according to their function, like, home loans, auto loans and educational loans.Today most of the loans are installment loans, with exceptions, like, payday loans.
Short Term Installment Loan
A short term installment loan is a type of short term loan, wherein the money borrowed has to be repaid in a shorter period of time, usually 1 - 5 years. The only difference is that unlike other short term loans, a short term installment loan is to be repaid in parts at regular intervals. A short term
installment loan can be taken for various purposes, like, purchasing a motorcycle or a flat screen television or a personal loan.
The application process for this kind of loan can be usually completed with the help of a form that is available on the lender's website. After the application, the process of sanctioning begins. During the sanctioning process, the lender takes into consideration many factors. One of the first factors that is taken into consideration by the lenders during the sanctioning routine is the credit history of the borrower. The credit history is a rating of the creditability of the borrower, evaluated on the basis of past loans that have been borrowed. The second factor that is considered is the periodic income of the borrower. The applicants of short term installment loans can be classified into two types, namely the employed people and the self employed. The self employed people find it a little difficult to avail a short term installment loan due to the fact that lenders are hesitant to avail these loans to self employed people. In the case of such applicants, they have to prove their income projection to the lenders. One of the common ways to do this is to submit a list of all the up coming payments due from clients or customers and also a list of reliable debtors. If a self employed applicant has not already borrowed any other long or short term installment loan, then the chances of the short term installment loan getting approved are very good. The employed applicants who have a pretty good credit history, usually find it easy to get the approval for a short term installment loan.
Another factor that is to be considered, by both the lender and applicant is whether the loan is a secured loan or a non-secured loan. A secured loan is a loan for which the borrower has to pledge a collateral or asset with the lender. In case of a default (cases where the loan and the interest are not repaid by the borrower), the lender is authorized to sell or dispose off the collateral in order to recover losses. Loans that have been availed to purchase assets, like, cars are simple to avail because the asset itself is pledged as a collateral. A short term installment loan for people with bad credit, many a times requires a collateral. In case of a non-secured loan, the borrower does not have to pledge an asset. A non-secured loan is sanctioned for people who have very good credit history and also an assured income projection.
Repayment of this type of loan is supposed to be done in a short time, hence the name, short term installment loan. The repayment is usually deducted by the lender directly from the salary of the applicant or from the savings account of a self employed borrower periodically. Due to the short term, the interest on the loan is high, in comparison to other loans.
It is always advisable to check the total cost of the loan (principal + interest) and all the installments before actually applying for it. Also one must also assess if the collateral is reasonable or not. And last not but not least, a good credit history has the benefit of quick sanctioning of the loan.
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