The dream of home ownership is one for many and one of the more costly dreams at that. Along with the purchase of the home, you have maintenance, bills and unforeseen expenses. So how do you move forward with this dream? An installment loan may be the right home loan for you. Read below to see if this type of investment is right for your budget and lifestyle.
An installment loan is a type of loan that companies, banks, and lenders offer for you to buy your own house. Installment loans work by lending you an amount of money that you have to regularly pay until you have repaid what you borrowed plus the interest. Some installment loans require the borrower to hand over something of value as collateral for the money borrowed until you finish the last regular payment. The regular payment is called installments.
Installments are based on the amount you borrowed plus the interest, which is then divided into a set of payments in a span of months to years. Such installment can be in a small amount for you to pay for it religiously. However, it would take a long time before you can finish paying the amount you borrowed. If you earn enough money that can sustain a higher regular installment, you can always opt for a higher installment and shorter payment span.
CreditNinja installment loans offer a variety of loans that entails low-interest rate with a simple borrowing process and no hidden fees. They provide car loans, personal loans, and mortgages. A type of installment loan that suits for buying a house is a mortgage.
Also known as “claims on property” or “liens against property,” mortgages are debt instruments used in real estate properties. The lenders let you borrow money for you to buy a house. You, as the borrower, must pay the money you borrowed plus the interest through installments. If you fail to pay the loan, the lender may repossess your house. However, if you successfully paid for your debt, you will have full possession of your property.
There are two types of mortgages — the fixed-rate mortgage and the adjustable-rate mortgage.
As the name implies, a fixed-rate mortgage offers the same interest rate throughout the payment span. The principal amount to pay and the interest rate does not change starting from the first payment up to the last. If there is a drop in the interest rate, the borrower can opt to pay ahead of schedule to make the span of the loan shorter.
ARM or Adjustable-rate mortgage also offers a fixed rate for an initial term. However, it fluctuates depending on the market interest rates. Some lenders offer a below-market rate for the initial interest rate, which becomes affordable for potential borrowers. However, this may lead to becoming less affordable in the long-term rate. If the interest rate increases, the borrower may not be able to pay the installment. This type of mortgage presents varying interest rates.
Finding what works best for you is essential when starting the journey of home buying. Talk to your bank or a finance specialist to find what fits best for your budget. Whether it’s a fixed-rate mortgage or an adjustable-rate mortgage, as long as you carefully plan and manage your debts, you can still see the bright side of loans.