Installment loans can be a good option in these trying economic times. No one can predict the added burden of inflation and other economic pressures.
Luckily, good installment loans can be a tool you can use to manage these stresses. If you’re considering borrowing, the following are just a few of the reasons many Americans are choosing installment loans in 2025.
What is an Installment Loan?
An installment loan is a financial product that provides cash with structured repayment. It is not like a credit card where you can put off paying your bill until your debt gets out of hand.
Installment loans are a great option since they offer flexibility. They are available for almost any personal purpose and from many lenders. Your options include in-person and online installment loans from banks, credit unions, and private lenders.
Even though you can find countless options, not all will suit your needs. As well, you may not qualify through certain lenders. Generally, traditional lenders such as banks and credit unions have stricter criteria.
There’s a Lender for Almost Any Borrower
Installment loans come in many variations. Even so, lenders tend to limit what they offer to attract certain borrowers. For instance, mainstream lenders try to attract low risk clients.
Alternative lenders fill the lending gap by offering many other installment loans. Examples include installment loans for those with little or no credit, bad credit, or alternative income sources.
Basically, most borrowers can find installment loans, no matter their circumstances. Online loans are evolving in 2025 too, making it even easier to find what you need.
Loan Terms
Flexible installment loan options are great, but you definitely need to understand precisely what the lender’s offering. The following are a few terms used in installment loans that you should understand:
Loan Term – The loan term is the total length of time set for you to pay off your installment loan through scheduled payments. Most installment loans offer terms of between 6 months and 5 years, but there are exceptions.
If you choose a shorter term, your payments will be higher. The advantage is that you also pay less interest. As a rule, it is best to choose installments loans with the shortest term you can comfortably afford within your budget.
Interest Rate – The interest rate advertised by the lender is the amount you will pay in interest on the principal of the installment loan. This is expressed as a percentage rate. Typically, installment loans have fixed interest rates that do not change throughout the loan term.
Be careful though. Some lenders offer variable rate installment loans. While these may have a lower rate initially, their rate is tied to the prime rate. If the government raises the prime rate, the cost of variable interest rate installment loans increases too.
Annual Percentage Rate – Don’t confuse the interest rate with the Annual Percentage Rate (APR) on installment loans. The interest rate does not include additional fees, while the APR usually includes most of them. Still, the APR may not include all fees so you should read more about APRs before you borrow.
Payment Amount – Installment loans rely on regular equal payments. You pay a set amount that goes towards the amount you borrowed and the interest the lender charges.
Loan Fees – Many lenders offer installment loans without additional fees. However, others charge administrative fees, origination fees, or prepayment penalties. Read more about these fees before you choose a loan.
Many Qualify Even Though They Don’t Have Perfect Credit
One of the major reasons so many Americans choose installment loans is the range of choices. Even if an applicant can’t get a loan through a bank or credit union, they may still be able to get a loan elsewhere.
Still, it makes sense to maximize your credit score before you apply for installment loans. It increases your chances of approval and you may get a better interest rate too.
You Don’t Need to Fill Out Multiple Application Forms
Of course, you want to get the best possible interest rate and APR on installment loans. However, you need to go about the application process in the right way or you could negatively impact your credit scores.
Traditional lenders tend to use a hard credit inquiry, which can lower your credit scores for up to two years. Luckily, you can avoid this situation when you use a loan broker with a pre-approval or pre-qualification process.
Why? This process uses a soft credit inquiry that does not impact your credit scores. Plus, a broker gives you instant access to many lenders. One application form and the broker does the legwork for you. Once they find suitable lenders they show you what they have to offer. You choose the best, which saves you time and money.
Installment Loan Uses
Installment loans can be used for many purposes. The following are some of the common, because it’s convenient and makes financial sense.
Debt Consolidation
The average credit card debt in February 2025 of Americans was around $6,500. While that may not sound too bad to some people, consider the median average credit card interest rate is now around 24%.
If you do not pay off the balance in full after your credit card’s grace period, the creditor adds interest to what you owe. The next month you pay interest on this higher balance, making it very hard to eliminate your debt.
Luckily, installment loans are often a lifesaver for those carrying a lot of high interest credit card debt. They can pay off all their credit cards and make one payment instead of juggling many.
Installment loans also use simple interest, so every payment pays down the principal and the interest owed for that period. Interest does not accumulate on the unpaid balance.
Plus, paying off high interest credit lowers your credit utilization ratio. That’s how much revolving credit you use compared to your limits. Paying installment loans on time builds your payment history, increases your credit mix, and could increase your credit score too.
Making Major Purchases
If you’re considering a major purchase such as a new appliance, piece of tech, or a workshop tool, then installment loans are often your best choice.
Why? As mentioned, you pay simple interest which does not accumulate on the unpaid balance. Your payments remain the same throughout the loan and you know exactly when you’ll pay off your loan.
Installment loans are also a better choice than a buy-now-pay-later option that many retailers offer. They may seem like they are a great interest-free deal, but that is often not the case.
Handling Emergencies
It is far too easy to slap unexpected on credit cards. Unfortunately, this often leads to accumulated debt and a huge impact on your daily life.
Luckily, an installment loan is a great solution since you can access money quickly and repay comfortably. You don’t have to drain your savings and you certainly don’t have to resort to expensive choices such as payday loans.
Sticking to a Budget for Major Events
Charging your vacation or wedding makes no sense. It is easy to overspend and you pay more interest than you need to.
Instead, decide how much you want to spend and get an installment loan. You can lock in the best prices on whatever you want and you’ll know how much you’ll pay later. Plus, you won’t drown in unnecessary debt afterwards.
Building Home Equity
You don’t need to put your most valuable asset at risk when you use installment loans to improve your home. These loans are unsecured, so there’s no lien on your property. This is not the case with home equity loans.
Installment loans are best-suited for small renovations that can increase home equity. Examples include painting your house, adding a garage, changing your front door, or replacing your windows.
Buying a Used Vehicle
It is almost impossible to get financing for used vehicles, but especially for items such as boats, ATVs, and RVs. Even if you can get it, the lender will place a lien on your vehicle.
So, what else can you do? You can pay for the vehicle in cash, but that’s often tough since the cost is usually high. You could also use an installment loan to pay for your vehicle. The bonuses are that you don’t need to save up for a deposit and there’s no lender lien on your vehicle.
Paying Off Medical or Tax Bills
Americans know that medical expenses and taxes can be expensive. Even if you have medical coverage, there always seems to be something it will not cover. Repaying the IRS often involves additional interest and penalties that you never seem to conquer.
Luckily, installment loans can help you settle these outstanding bills. You choose how you want to repay and you can often get a better interest rate than you might expect.
Helping Americans Find Installment Loans
After reading this, you may want to know more. Check out these common questions about online loans to find out if installment loans seem like a good fit for you.
If the answer is yes, discover why so many borrowers trust FlexMoney. We offer an extensive network of lenders and an easy, safe way to find your best possible installment loan.
Complete one application form and we’ll immediately show you what’s available to you, without affecting your credit scores. Our lenders offer between $200 and $35,000 and you could qualify, even if mainstream lenders turned you down.