Unsecured installment loans allow a consumer to borrow a sum of money, such as for a computer or medical expense, and pay a regular monthly payment over a fixed payment of time. Unsecured means no collateral is required to guarantee the loan, unlike auto loans which are secured by an interest in the vehicle's title.
There are many types of unsecured installment loans. Some simply loan cash without requiring any justification of what the money is used for. Others loan for specific purposes, such as orthodontic braces, breast implants, or computer purchases.
An installment loan is considered a good credit bet because the consumer must pay a fixed amount each month and cannot immediately borrow more money, unlike on a credit card. A properly paid unsecured loan's balance goes down each month.
Before accepting an unsecured installment loan, keep in mind that some have interest rates as high as 30 percent per year. It may be a better choice to make the purchase on a credit card.
Having an unsecured installment loan on one's credit report is considered an important part of credit scoring, as potential lenders like to see people's ability to pay off diverse account types in a timely fashion.
Getting approved and funded for an installment loan usually can happen in a matter of hours or a few days, unlike credit cards which could take well over a month to receive in the mail.