How Do Installment Loans Work?

Every now and then a financial emergency comes up that requires immediate cash. It could be an overdue rent bill that threatens eviction or a car breakdown that is preventing the owner from getting to work. Whatever the emergency, a quick loan can often help people get back on their feet. Before applying for a payday or installment loan, it’s important to understand how they work.

How Much Money Can The Borrower Get?

Different lenders have different policies regarding loan amounts, and borrowers have to qualify according to the lender’s requirements. At Maxlend Loans, for example, a first-time customer can borrow up to $1,200, while a returning customer is eligible for a loan of up to $2,000.

How Are Loans Repaid?

Most lenders require a debit from the borrower’s checking account. They collect the payments according to a schedule, and the borrower doesn’t have to do anything except make sure that funds are in the account. Some lenders also accept payments made by credit card.

How Do Borrowers Qualify For A Loan?

While installment loans are generally much easier to get than a bank loan, lenders do impose certain qualifications. Typically, customers must have a verifiable source of income and meet a minimum income requirement. They must also have an open checking account where funds can be deposited and payments can be debited. In addition, U.S. borrowers must be over the age of 18 and residents of the U.S.

How Much Does An Installment Loan Cost?

Each lender determines their own interest policy, but a typical installment loan charges a monthly fee of between $15 and $30 per $100 borrowed. In other words, a $1000 loan might cost $150 per month until the payments are finished. Some lenders lower the fee for returning customers, and in most cases, borrowers can lower the fee amount if they pay off the loan early.

What Happens If The Loan Is Not Repaid On Time?

An installment loan that goes into default can become very expensive as penalty fees are added on and interest continues to accrue. Fortunately, most lenders are willing to work with customers to renegotiate a payment plan rather than turning the debt over to a collection agency. Borrowers who are concerned about their ability to make payments should contact their lender right away.