Auto loans, mortgages, student loans, credit cards, personal loans – almost every type of loan falls into one of two camps: installment loans or a revolving line of credit.
When qualifying for an installment loan, lenders take into account your credit score and general financial health, and then you borrow a specific amount that you agree to pay back (plus interest) in monthly payments – also known as installments. So auto loans, mortgages, and student loans are all different types of installment loans.
Auto Loan
When buying a new or used car from a dealership, the first step in most cases is to get prequalified for a car loan with your bank or credit union. This will tell you the maximum you can afford to spend on a car and what you can expect your monthly payments to look like. Make sure you do your research solidly before you approach a dealership. Have at least two vehicles in mind and check out the price range, reliability, and insurance costs of each one. Edmunds and Kelley Blue Book are great resources for determining the value of a car.
After you decide on a car, find a dealership that has what you want at a fair price, and take the car for a test drive. When you go in to sign the paperwork, make sure the purchase agreement matches what you’ve agreed on with the salesperson. (The best self-preservation tip for using a dealership is to always be willing to walk away.)
Mortgage
Typically, if you make a 20% down payment and don’t have an excessive amount of other debt, it’s recommended that you look for homes that cost no more than 3 to 5 times your total yearly income. There are mortgage calculators available online that do the math for you.
Just like with a car loan, the best way to know how much you can afford is by getting prequalified for a mortgage. Find a reputable mortgage banker, and he or she will review information such as your income, your savings, and investments, and figure out how much they can lend you. This amount is the price range you should be looking at for homes.
Student Loan
There are mainly two types of student loans you can apply for: federal and private. To apply for federal student loans, you first must complete the FAFSA (Free Application for Federal Student Aid). This is done easily online at the FAFSA website. Some of the loans are needs-based, so you’ll want to have information readily available such as SSN, driver’s license number, tax returns, etc. The FAFSA will also let you know whether you qualify for any federal grants or scholarships.
If you still have a gap in your financing after the FAFSA, private student loans are an option. They typically have higher interest rates than federal loans, so you’ll want to be careful how much you take out.
If you’re looking for a safer kind of loan, make sure to look into Lift Credit installment loans. The application process is quick and straightforward, and if you apply during business hours, you’ll often have your answer within 30 minutes. Click below to get started!
