What Type of Borrowers Benefit from an Installment Loan

An installment loan is a very common lending instrument that many people have for a variety of applications. With an installment loan, you are allowed to make payments over the life of the loan until the balance is paid off. There are many different kinds of installment loans from mortgages to auto loans. With so many different types of loans available, they help a lot of different types of borrowers get the money that they need. Here are a few types of borrowers that can benefit from an installment loan. 

Young People

One of the most common groups that uses installment loans regularly is young people. Those that are just getting started in the financial world, often do not have enough money to buy what they want. Therefore, they require an installment loan so that they can get the things they need. For example, most young people are going to be starting a career and need some form of transportation. Unless they have several thousand dollars saved up, they will have to get an installment loan on a car to get them to and from work. An installment loan allows them to make small, manageable payments on a monthly basis instead of coming up with the money that it would take to buy the asset. 

Financially Savvy

Another group of borrowers that use installment loans are those that are financially savvy. Many people in this category have plenty of money and they got it by being smart. When you can get an installment loan for something that you need at a lower interest rate, it may be to your advantage to use it. For example, let's say that a borrower in this category has $500,000 in savings. They want to buy a house for $500,000 and the interest rate for a mortgage is 4.5%. As it turns out, they know of an investment that pays them 5% on their money. They would be better off to keep their $500,000, invest part of it and keep the rest in savings if they want. They can get a mortgage and get the house that they want. They are making more money off of the interest than they are being charged with the mortgage. These kinds of strategies allow those with money to grow their wealth and stay in good shape financially. 

Retired

Many retired people are also great candidates for installment loans. A lot of retired people are living on a low, fixed income. They have an annuity or a pension that is paying them a certain amount of money each month. They may be trying to live on Social Security and a small retirement plan that they have. In this case, an installment loan can be very beneficial to them. If they need to buy a car or another big-ticket item, an installment loan can allow them to afford the monthly payments and get what they want. 

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