Personal Loans: Are They Installment or Revolving Credit?
Most of us will need to take out a loan at some point. Whether it’s to pay for a house or a car, or to consolidate debt, taking out a loan can be a helpful way to finance large purchases or consolidate debt into one manageable payment. Before deciding on a loan, you need to understand the different types of credit available.
Personal loans are one of the most common types of loans. They’re unsecured, meaning they don’t require collateral like a car or house and can be used for various purposes, such as paying for a wedding, home improvements, or medical bills. Personal loans typically have a fixed interest rate and are repaid in installments over a set period of time. Personal loans usually come in two types: installment credit and revolving credit. Few people know how this works, so we will discuss the details in this article.
What Is Installment Credit?
Installment credit is a loan repaid in equal, regular payments over a specific period. Personal loans, mortgages, and car loans are all examples of installment credit. When you take out an installment loan, you receive a lump sum of money upfront and then repay it in regular installments over the life of the loan. The payments are typically the same amount each month, and the loan is paid off at the end of the term.
What Is a Revolving Credit?
Revolving credit is a type of credit that doesn’t have a fixed repayment term. Instead, you are given a credit limit, and you can borrow against that limit as needed. Credit cards are the most common type of revolving credit. With a credit card, you can spend up to your credit limit and then make payments to pay the balance. As you pay the balance, your available credit increases, allowing you to borrow more if needed.
Is There a Difference?
Yes, there is a difference between installment credit and revolving credit. Installment credit is a loan repaid in equal, regular payments over a set period, while revolving credit doesn’t have a fixed repayment term. With installment credit, you receive a lump sum of money upfront and then repay it in regular installments over the life of the loan.
With revolving credit, you are given a credit limit. You can borrow against that limit as needed and then make payments to pay down the balance. The main difference is that installment credit has a fixed repayment term while revolving credit does not.
How Personal Loans Are Used
Personal loans can be used for various purposes but are most commonly used for debt consolidation, home improvements, and large purchases.
Debt consolidation involves taking out a personal loan to pay off multiple debts, such as credit card debt, student loans, or medical bills. By consolidating your debt into one loan, you may get a lower interest rate, saving you money on interest charges and helping you pay off your debt faster.
Home improvements are another common use for personal loans. Whether you need to replace a roof, remodel a kitchen, or add an addition to your home, a personal loan can provide the funds you need to make the improvements you want.
Of course, personal loans can be used to finance large purchases, such as a car or a vacation. By taking out a personal loan, you can spread the cost of the purchase over several years, making it more manageable to pay off.
Lender Considerations When Applying for a Personal Loan
When applying for a personal loan, there are several factors that lenders will consider. Your credit score is one of the most critical factors. Lenders use your credit score to determine your creditworthiness and the interest rate you’ll be charged. Generally, the higher your credit score, the lower your interest rate.
In addition to your credit score, lenders will consider your income, employment history, and debt-to-income ratio. Your debt-to-income ratio is the amount of debt you have compared to your income. Lenders want to ensure you’ll be able to make your loan payments, so they’ll look at your debt-to-income ratio to determine whether you can afford to take on more debt.
Improving Your Credit Score
If your credit score is lower than you’d like it to be, there are several steps you can take to improve it. First and foremost, make sure you’re paying all your bills on time because late payments can significantly impact your credit score. Conversely, you must pay down your credit card balances. High credit card balances can hurt your credit score, even if you make timely payments.
Above all else, you must never apply for too much credit at once. When you apply for credit, the lender will pull your credit report, which can temporarily lower your credit score. Too many credit inquiries in a short period can make you look like a risky borrower, which can hurt your chances of getting approved for a loan.
King of Kash: Your Online No-Credit Loan Provider
Personal loans are the best option if you need to borrow money for a specific purpose, such as consolidating debt or making a large purchase. However, you must ensure you can repay the loan on time and in full to avoid damaging your credit score. Whether you’re applying for a personal loan or any other type of credit, you must maintain good credit habits to maintain a good credit score for easier loan applications.
If you want to apply for a no-credit loan online, King of Kash can help you! Everyone’s financial circumstances are different, so we make it easier for you to borrow money to help you get cash for your needs. Call us today at 1-800-892-3006 to apply!
Cary Silverman is a consummate entrepreneur having sold multiple companies during his 20 years of business experience in the financial industry, but for him, it isn’t about the money. His success is rooted in his passion to focus on doing something better today than it was done yesterday. These days, he’s the CEO of Waldo General, Inc. that oversees the operation of King of Kash.