Diving Deep: Hard Money Lending and Installment Loans  

By November 30, 2018Uncategorized

Thanks to payday and auto title loans, the installment loan industry has gained an unsavory reputation. The reality, though, is that installment loans vary in their execution. With the right type offered by a reputable company, the funding needed by an estimated 10 million Americans annually is extended for a variety of reasons.

The yearly spending on the fees and interest associated with installment loans tops $10 billion, borrowers typically applied for amounts ranging from a few hundred to over $10,000. While there is the perception that installment loans charge exorbitant annual percentage rates, the reality is that the rates offered are often much lower than those charged by the companies that provide auto title and payday loans.

In fact, such loans were found to usually be three or four times less expensive than those from lenders who issue auto title, payday and other similar types of loans. This was based on an analysis performed by the Pew Charitable Trusts which looked at loan contracts, lender disclosures, state regulatory data and more.

Another finding that stands in stark contrast to the reputation that installment loans have gained is that many borrowers indicated that their monthly payments were affordable. About 85 percent of installment loans comprise five percent or less of the borrower’s monthly income. The repayment terms vary but usually range from four months to five years.

Perhaps the most important aspect of installment loans that should be remembered is that the practice can benefit both lenders and those that borrow the money.