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Instalment Loans: An Easy Option To Complete Repayment

Updated on: 8 Feb 2024

An instalment loan is the most common type of credit that banks and NBFCs offer. Once you borrow a required sum, you need to repay the amount along with interest in affordable instalments within a specific timeline.

You can use the borrowed amount for the following purposes:

To pay educational expenses
To clear hospital bills
To finance a vehicle
To purchase a property

Read on to know more about this financial tool and its benefits.

Instalment Loan Meaning

Check out some important points about this form of credit:

The borrowed sum attracts interest, which you must also pay as the equated monthly instalment or EMI
You can avoid paying the amount as a lump sum
Pay the borrowed amount for a predetermined period, called a loan term, which may range from a few months to a year
The lender will close your loan account once you repay the entire outstanding amount

Types of Instalment Loans

Instalment loans are classified into two types:

Secured Loans

You need to pledge your valuable assets as collateral
In the case of default on repayment, lenders can rightfully sell or auction your pledged assets to recover the loan amount
Examples of secured loans include gold and home loans

Unsecured Loans

In this form of credit, there’s no need to pledge collateral
The borrowing costs may be higher, as there is a risk of default for the lender
Examples of unsecured loans include personal and student loans

Instalment Loan Example

Some additional examples include:

Auto Loan: This secured instalment loan allows you to buy a new or used car by pledging the vehicle as collateral, typically for a tenure ranging between 2 and 7 years
Buy Now, Pay Later Facility: This short-term, unsecured loan makes shopping easy by providing interest-free credit
Payday Loan: This is a short-term, high-cost, personal loan which helps you meet emergency financial needs
Student Loan: This is a type of credit that allows you to finance your education and other related expenses

Pros and Cons of Instalment Loans

Here are some benefits of these forms of credit:

It helps you avoid lump sum payment
It allows you to manage a monthly budget with a fixed instalment amount
It enables you to build a good credit score for future loans
You can decide on a suitable tenure as per your repayment capacity
Taking an instalment loan online allows you to get instant approval
Allows you to cover all your major life expenses

While it is a good option, you must also consider its drawbacks, which are as follows.

For a secured type of loan, your asset is at risk for the chosen tenure
Some lenders may have stringent approval criteria
There may be additional charges involved, which can increase your borrowing costs

based on these facts, you can decide whether or not you should opt for an instalment loan. Compare interest rates and other terms before selecting a lender. One such NBFC offering affordable loan terms is Fibe. With our Instant Personal Loan, you can borrow up to ₹5 lakhs hassle-free from the convenience of your home.

You can choose a flexible tenure of up to 36 months and get the loan amount transferred to your account within 10 minutes after approval. This way, you can manage your instalment loan payments effortlessly. Download our Personal Loan App or visit our website to get started!

FAQs on Instalment Loans

How do instalment loans work?

Say you have applied for instalment loans online and received approval from the lender
The amount will be credited to your bank account
You must pay a fixed monthly instalment, including the interest and the principal amount, to the lender across a chosen timeline
The loan account gets closed once you clear the outstanding