If you search the Internet for a brief description of installment agreements, you might be confused by articles that refer to “installment loans.” In this post, we try to provide some clarity about what, exactly, an installment agreement is.
You might be looking for a cash infusion for your business, or you might need a personal loan. Whatever your need right now, always pay attention to the specifics when you’re requesting a loan of any kind, whether on cashspotusa or any other financial platform.
What Do You Need to Know About Installment Agreements?
The lender issues the funds for an installment agreement under specific guidelines. For example, the lender issues the agreement for a set amount of money at a specific rate of interest. Additionally, the payments are fixed as well. The signed loan agreement must contain all the important details and conditions of the loan and it asserts that both parties are in mutual agreement.
Compare this with the revolving credit banks and other lenders provide. Revolving credit comes with a set credit limit and a flexible payment amount based on the amount of your credit limit you have used. Revolving credit often comes with a variable interest rate as well. A credit card is an example of revolving credit.
Sometimes a bank or other financial institution will issue the funds for an installment agreement. At other times a merchant issues the funds in order to allow a customer to purchase a specific piece of merchandise.
Installment Agreements Come with a Fixed Interest Rate
These agreements carry a specific and fixed rate of interest. The repayment schedule is also fixed. That is, the lender generally requires payments in a set amount at regular intervals, usually monthly.
Will You Need Collateral?
An installment agreement is generally issued for a clearly defined purpose such as buying a car, a household appliance, or other goods. Therefore, installment agreements often require collateral, such as the merchandise the customer is purchasing. For example, a mortgage is an installment agreement that uses the home that’s being purchased as collateral.
However, some lenders issue installment agreements without collateral. In these cases, the lender might require you to obtain personal recommendations from trustworthy individuals who know you.
Will You Need an Application?
Before you can obtain an installment agreement, you will need to submit an application, either online or in person. Then the merchant or other lender will either approve or reject your application.
Is There a Contract for This Type of Agreement?
In most cases, both buyer and seller sign a contract for an installment agreement. This contract stipulates the conditions for both parties. It covers the interest rate, states its maturity date, and specifies any applicable fines and fees. The contract will also describe the nature of any additional fees that might come due in case the customer fails to repay the agreement as stipulated in the contract.
RELATED ARTICLE: 6 CONTRACT TYPES YOUR BUSINESS NEEDS
Can I Apply Online?
It’s safe to say that you can obtain an installment agreement without the need to leave your home or your business. You simply choose an online lender, complete the application online, and await the approval of your application. Often the lender will approve your application within days, if not hours or even minutes.
On the other hand, if you’re hoping to use an installment agreement to help with the purchase of a piece of merchandise such as a dishwasher or a car, you might want to visit the merchant in order to shop around for exactly the item that best meets your needs.
In that case, it would make sense to simply apply in person. Often the merchant will make the funds available within minutes. Then you can request delivery of the merchandise to your home—or, in the case of a car for example, drive it home with you.
Do These Agreements Come with a High Interest Rate?
Often, lenders issue installment agreements for shorter periods than they do other loans. Additionally, the interest rate is often lower as well. In fact, some installment agreements come with very low or even zero interest. However, these low rates of interest usually remain in effect only within the set term of the contract or another specified period.
What Are the Benefits of Installment Agreements for Buyers?
Installment loans have the following benefits for buyers:
- Lenders generally require only a small packet of documents.
- You can register and apply quickly.
- Much of the time, you won’t need to offer up any collateral.
- Generally speaking, you will have a choice as to how much time you’ll need to pay off the agreement. Often, the lender will allow you to extend the agreement if you need to.
- The interest rate for the agreement is quite often very low or even zero.
What Are the Benefits of These Agreements for Sellers?
Installment agreements are popular among many merchants since they allow stores to increase the number of their customers and boost their sales.
On the other hand, these agreements do carry risks for the seller. That’s because if the seller makes the mistake of issuing an installment agreement to an unreliable buyer, the seller could lose both the goods and the money.
So whether you need a personal loan or you need to purchase a new piece of equipment for your business, always be aware of the specifics when you contract for a loan of any kind. This is true whether you apply online or off. In other words, always read the fine print for any loan.