What’s the Difference Between Revolving and Installment Loans?

Before you borrow money, it is important that you understand all of the parameters of your loan. Taking out a loan can come with a host of complexities, and so you want to ensure that you know what you are undertaking when you borrow money. The two primary groups of loans are revolving loans and installment loans. Each type of loan has key differences that may make it a better choice for your financial needs. Here is the difference between revolving loans and installment loans.

Installment Loans

Installment loans generally come with a fixed payment paid at a designated time. Most installment loan payments are paid each month. Banks, credit unions, and online lenders are the most common issuers of installment loans. These loans come in the form of mortgages, personal loans, or vehicle loans. It’s common for installment loans to have fixed interest rates, so you know what your payment will be each month. These types of loans are predictable, giving you a full picture of how long it will take to pay off the debt and what the total cost of the loan will be.

Some installment loan types come with variable interest rates that are tied to various financial indexes. If you choose this route, be sure to educate yourself about how this rate may change based on your qualifications and other factors. Installment loans may be a good choice if you are faced with an unexpected emergency financial situation and don’t have enough in savings to cover the expenses. In these cases, some people consider looking into short-term loans online to help them tackle an unexpected emergency expense.

Revolving Loans

A revolving loan delivers more flexibility but also with a high level of responsibility. Some of the most common examples of revolving debt are home equity lines of credit and credit cards. When you choose this type of loan, you are awarded a maximum borrowing limit, but you are not obligated to use all of that line of credit. Some types of revolving debt are open ended, meaning that you can borrow and pay back the debt indefinitely. A credit card is a good example of this type of debt. With a revolving loan, you will not know ahead of time what the total cost of borrowing will be to you since it is a fluid type of debt.

Before you make any major financial decisions, you should decide which type of loan is right for your particular situation. This will help to guide your decision when choosing between a revolving or installment loan.

Here’s another article you might like: Need Financing for Your Home Improvement Project? Try These 3 Tips

Posted in

How to Become an Entrepreneur Without Doing All the Work

By editor | September 20, 2022

Entrepreneurship can sometimes seem like an exhausting, draining job. And that’s because it is! There are lots of ways to explore your entrepreneurial options…

Sunil Wadhwani McAllen

From Humble Beginnings to Successful Hotelier: Sunil Wadhwani

By Staff Writer | September 19, 2022

South Texas hotelier Sunil Wadhwani is a success by any definition of the word. He owns eight hotels and has been in business for…

How to Reduce Expensive Mistakes in the Workplace

By editor | September 19, 2022

No one is perfect, and that includes employees. Sometimes, mistakes can be costly for a business. To minimize the amount of money wasted on…

Ralph Sanders

From Darkness to Light: Ralph Sanders is an Inspiration for Troubled Youth

By Staff Writer | September 17, 2022

Sometimes, we have to reach our darkest hour in order to see the light. For Ralph Sanders, this couldn’t be more true. After going…

Dr. Louis Hampers

Emergency Pediatrician Dr. Louis Hampers Exceeds Expectations At Every Turn

By Staff Writer | September 14, 2022

Described as talented, focused, passionate, engaging, and energetic, Dr. Louis Hampers has spent his career working tirelessly as an Emergency Pediatrician. Known for always…

Why You Should Listen to What Your Body is Telling You

By editor | September 14, 2022

Our bodies are incredible, layered, complicated machines. Our nervous system is perfectly constructed to deliver signals to the brain about all of the goings-on…

How to Keep Your Kids Safe in the Car

By editor | September 14, 2022

As a parent, one of the best ways to keep your kids safe is to keep a careful eye on them. However, you can’t…

A Conversation with Yael Eckstein, IFCJ President and CEO, on the Festival of Weeks, Shavuot

A Conversation with Yael Eckstein, IFCJ President and CEO, on the Festival of Weeks, Shavuot

By Staff Writer | September 7, 2022

Yael Eckstein, IFCJ President and CEO, oversees all ministry programs and serves as the international spokesperson for the International Fellowship of Christians and Jews.…

The Freedom Era

By Staff Writer | September 1, 2022