What are Instalment loans – Types, process & more

There are plenty of ways to apply for loans in today’s time. But how do you really find out the differences between these different types of loans? Which one should you go for, or which one should you avoid? In this blog, we will go through some of the aspects of an instalment loan, the different types of these loans and whether you should get one. 

If you are just looking for a personal loan with less documents, then apply from the Airtel Thanks app. Get the best personal loan offers with no collateral and relaxed EMI repayment options. 

What Are Instalment Loans?

An instalment loan is a type of loan that is repaid over time with a set number of scheduled payments. These payments are typically made on a monthly basis and consist of both principal and interest. Unlike revolving credit, such as credit cards, instalment loans have a predetermined end date and a fixed repayment schedule.

Read more: Documents required to apply for a personal loan

Types of Instalment Loans

Instalment loans are a broad type of loan, with many other types of loans coming under its purview. Here are the different types of instalment loans:

Personal loans

These are versatile loans that can be used for a variety of purposes, including debt consolidation, home improvements, medical expenses, or even vacations. Personal loans often come with fixed interest rates and repayment terms

Auto loans

Specifically designed for purchasing vehicles, auto loans usually have terms between three to seven years. The car itself often serves as collateral, which can make these loans easier to obtain at lower interest rates compared to unsecured loans.

Mortgage loans

These long-term loans are used to purchase real estate. Mortgages typically have repayment periods of 15 to 30 years and are secured by the property being purchased. Interest rates can be fixed or adjustable.

Student loans

Aimed at helping students pay for education-related expenses, student loans often have more favourable terms and repayment options.

Home equity loans

These loans allow homeowners to borrow against the equity in their home. The loan amount is based on the difference between the home’s current market value and the remaining mortgage balance.

Read more: How to take personal loans for students in India?

The Instalment Loan Process

Here is how the instalment loan process works:

Loan application

The first step is to apply for a loan, which can typically be done online, over the phone, or in person. You’ll need to provide personal information, employment details, and financial information.

Loan approval

Lenders will assess your creditworthiness by reviewing your credit score, income, and debt-to-income ratio. Depending on the type of loan, collateral may be required.

Loan agreement

Once approved, you’ll receive a loan agreement detailing the loan amount, interest rate, repayment schedule, and other terms. It’s crucial to read and understand this agreement before signing.

Loan is disbursed

After signing the agreement, the loan amount will be disbursed to you or directly to the seller or service provider, depending on the loan’s purpose.

Loan repayment

You’ll start making regular payments as per the agreed schedule. These payments will include both principal and interest. Consistently making payments on time can positively impact your credit score.

Read more: Top 7 benefits of a personal loan

Benefits of using instalment loans

Here are the biggest benefits of getting an instalment loan:

Greater predictability

With fixed interest rates and regular payment schedules, instalment loans provide predictability, making it easier to budget and plan your finances.

Lower rates of interest

Compared to credit cards and other high-interest borrowing options, instalment loans often offer lower interest rates, especially if they are secured.

Terms and conditions are usually flexible

Borrowers can choose loan terms that fit their financial situation, ranging from short-term loans to longer repayment periods.

Helps to build credit in the long term

Successfully repaying an instalment loan can help improve your credit score, as it demonstrates financial responsibility to lenders.

Cover significant expenses

Instalment loans generally allow you to borrow larger amounts of money compared to credit cards, making them ideal for significant expenses.

Therefore, instalment loans can be very useful and practical for those who wish to finance their upcoming expenses. Secured loans usually are the best amongst these, since they have the lowest interest rates. But if you are looking for an unsecured personal loan, then applying from Airtel Finance will be a great idea. Get the best interest rates for your loan, get instant credit approval and so much more.