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What Is a Loan You Pay Once a Month & How Can I Get One?

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Getting a loan may be your best solution when it comes to affording what you need and paying large expenses when they come due. There are many different forms of loans, but one of the most common is an installment loan.

An installment loan is generally paid once a month. We’ll explain how this type of loan works so you’ll be prepared if you decide to apply for one.

How Does a Monthly Loan Work?

Installment loans are one of the most well-known forms of loans. With an installment loan, you receive a large sum of money upfront, then make regular monthly payments back to the lender until you pay the loan off.

This may seem simple enough, but we’ve broken the process down into five smaller steps.

1. Find a Lender

Finding a lender is more complex than doing a quick Google search. Make sure you choose a reputable lender who has a long history of being in business.

2. Fill Out an Application

Most loan applications require information such as your name, address, credit history, banking information, and current employment information. The information you must provide will vary based on the specific company and how it determines loan worthiness.

3. Finalize the Contract

Your application will go through an approval process where a lending officer or automated system will review your information. If they find everything in order, they’ll approve the application for a certain amount of money and send you a contract to review and sign.

This is when it’s essential to read the entire contract carefully. Many contracts include late fees or other penalties you need to be aware of. Once you feel comfortable with the fine print, you can sign the contract.

4. Receive and Use the Loan

Once you finalize the contract, the lender will give you your money. They may deposit it straight into your account or hand it over as a check or cash. The money is then yours to use.

Many installment loans are given for specific purposes. For example, student loan financing is given to pay for college tuition and related expenses. If your lender asked you to give a reason for borrowing money, you should use the money for that purpose. If you get a personal loan, there may be fewer restrictions or expectations about how you’ll use the loaned amount of cash.

5. Complete Regular Monthly Payments

You borrowed the money, but now you have to pay it back. The lending company charges interest, of course, but they break down the lump sum into smaller monthly payments so it’s easier to pay off over time. You and the lender will agree on the payment amount when finalizing your contract.

Remember, if you fail to make your full payments on time, you will be subject to fines, which will increase your overall total due to the lender.

Is It Better to Pay Loans Monthly or Biweekly?

Most installment loans are paid off with regular monthly payments, but some lenders offer the option to choose biweekly payments instead. There are advantages and disadvantages to choosing biweekly payments.

Advantages of Biweekly Payments

If you want to save some money, biweekly payments may work for you. Biweekly payments take a normal monthly payment and split it into two two-week intervals. Because there are 52 weeks in a year, biweekly payers will make 26 payments in a year. This means you’ll pay an extra month’s worth of payment each year, saving you money on interest because you’ll pay off your loan faster.

It also might be helpful because biweekly payments could line up with your paycheck cycle, making it easier to budget.

Some lenders allow you to make extra payments, even if you have a typical monthly payment schedule in your loan contract. This is a good option to use if you want to pay off the loan faster but aren’t sure you can commit to biweekly payments.

Disadvantages of Biweekly Payments

While biweekly payments are a great way to save a little money, there are some drawbacks. Many lenders charge extra for a biweekly payment plan, which would cancel out any money you saved with this payment plan.

Also, because credit companies usually use a 30-day timeframe when analyzing data, making more payments won’t improve your credit score.

Do Personal Loans Build Credit?

Installment loans, also known as personal loans, are a good way to build credit as long as you make the payments on time. However, applying for a loan impacts your debt-to-income ratio, which may hurt your credit score temporarily. Missing a payment or making one late will severely harm your credit. It’s important to borrow wisely.

Choose an Installment Loan from Power Finance Texas

When you need an installment loan, Power Finance Texas is a reputable lending company with years of experience that is ready to help you afford what you need.
Thinking about an installment loan from Power Finance Texas? Fill out an application and see how much money you can borrow.