What is a bank installment loan? Experience in safe borrowing, low interest rates

In modern life, the need for spending, shopping or investing is increasing, making installment loans one of the popular financial solutions today. With the form of dividing the amount to be paid in installments, borrowers can be more proactive in their spending plans while still meeting their immediate needs.

1. What is an installment loan?

1.1. Concept

Installment loans are a form of loan in which the borrower repays the principal and interest in predetermined periods (usually monthly, quarterly or as agreed with the lender). Instead of paying the entire amount at once, the borrower will divide the amount to be paid over the loan period, helping to reduce financial pressure and easily balance income.

For example: If you borrow 30 million VND to buy a motorbike for 12 months, each month you only need to pay a part of the principal plus interest, and by the end of the term you have completed your debt repayment obligation.

Comparison table of the differences between installment loans and regular loans

Installment loans help borrowers be more proactive with their finances, suitable for personal consumption needs or purchasing high-value goods. Meanwhile, regular loans are often applied to small loans, short-term and need to be paid in one lump sum when due.

1.2. Benefits of installment loans for customers

Installment loans are becoming an increasingly popular choice for many people thanks to the following outstanding advantages:

• Reduce financial pressure: Instead of paying the entire loan at once, customers can divide the payment amount into installments, usually monthly. This helps reduce the financial burden and easily balance personal income.
• Flexible payment: Client can proactively choose a suitable repayment period (3, 6, 12, 24 months...). In addition, many financial institutions also allow early repayment with low fees, helping customers save costs if their financial capacity is better than expected.
• Simple procedures, quick disbursement: Currently, consumer installment loan packages have a quick approval process and minimal paperwork. Some financial companies or banks also support online loan registration, same-day approval, helping customers access capital quickly when needed.
• Suitable for many subjects: This form of loan is suitable for people with stable monthly income such as office workers, workers, small businesses, etc. In addition, many units also support loans for people without collateral, increasing access to capital for all subjects.
• Helps manage finances more effectively: Dividing payments helps borrowers plan their spending appropriately, avoiding spending beyond their means. At the same time, paying on time also helps build a good credit score, making it easier to get loans in the future.

2. Popular forms of installment loans

2.1. Installment loan

Installment loan is a form of loan that does not require customers to mortgage assets. The bank or finance company will consider and approve the loan based on monthly income, personal reputation and credit history.

Loan limits usually range from 10 to 200 million VND, with flexible repayment periods from 12 months to 60 months (5 years). Because no collateral is required, the unsecured loan process is quite simple, quick to approve and can be applied for online.

This form is often chosen by many people when they need to borrow for consumption such as shopping, traveling, studying or covering living expenses.

Advantage

• Quick procedure, no collateral required.
• Fast disbursement, suitable for short-term consumer loan needs (shopping, study expenses, medical expenses, etc.).
• No impact on personal property, as no collateral is required.

Disadvantages

• Higher interest rates than mortgages due to greater credit risk.
• Low loan limit, depending on customer's income and credit history.
• If payment is late or overdue, it may be recorded as bad debt on the CIC system.

2.2. Installment mortgage loan

Installment mortgage loan is a form of loan in which customers use valuable assets such as houses, cars, red books or savings books to secure the loan. Thanks to the mortgaged assets, banks can lend with high limits, up to 70 - 90% of the value of the assets depending on the regulations of each bank, with more preferential interest rates than unsecured loans.

Loan terms typically range from 5 to 25 years, helping customers reduce the pressure of monthly repayments. Loan terms can vary depending on the customer's borrowing purpose. However, the mortgage loan process is often more complicated, requiring property appraisal, notarized contracts, and longer approval times.

Advantage

• Low interest rates thanks to collateral.
• High loan limit, meeting large financial needs such as buying a house, buying a car or investing in business.
• Long-term loan period helps borrowers easily balance their finances.

Disadvantages

• Complicated procedures need to prove property ownership and valuation.
• Approval time is longer than unsecured loans.
• Customers risk losing their assets if they do not repay their debts on time.

3. How to calculate installment loan interest

3.1. Interest is calculated on the decreasing balance

With this method, interest is calculated based on the remaining principal balance after each payment period. That is, the later the principal balance is, the less the interest payable will be. This is the method of calculating interest that is currently applied by most banks and financial companies because it ensures fairness and accurately reflects the actual amount that customers owe.

The form of loan with decreasing balance has advantages such as:

• Interest compounded over time
• Reflect the actual debt
• Helps borrowers save money because the total loan cost is lower than the calculation based on the original principal balance.

This form is especially suitable for medium and long-term loans. However, the disadvantage is that the monthly payment is not fixed, often high in the first months and gradually decreases later, and customers may have difficulty estimating the total cost if they do not understand how to calculate interest.

Calculation formula

Illustrative example

Suppose you borrow 120,000,000 VND for 12 months with an interest rate of 12%/year (i.e. 1%/month), paying in installments according to the decreasing balance.

• First month: Principal balance is 120,000,000 VND

→ Interest = 120,000,000 × 1% = 1,200,000 VND.

• Monthly principal payment = 120,000,000 / 12 = 10,000,000 VND.
  → Total first month payment = 10,000,000 + 1,200,000 = 11,200,000 VND.
• In the second month, the remaining principal balance is 110,000,000 VND, 

→ interest = 110,000,000 × 1% = 1,100,000 VND

→ total amount to be paid this month = 11,100,000 VND, and so on.

3.2. Interest is calculated on the original principal balance

This is a form of interest calculation in which the interest is calculated based on the original principal amount, which does not change during the loan period. Even if the customer has paid a part of the principal, the interest is still calculated on the total original principal amount, making the total monthly payment always equal. This form is often applied by consumer finance companies because it is easy to understand, easy to predict and suitable for customers who want to pay fixed monthly installments.

The form of loan based on the original principal balance has the following advantages:

• Fixed monthly payment amount, helping customers easily plan their spending
• Simple calculation, quick procedure, suitable for small consumer loans or installment purchases.

However, the total cost of borrowing is often higher than the reducing balance calculation, does not accurately reflect the remaining principal amount, and customers may be charged a higher actual interest rate if they do not read the contract carefully.

Calculation formula

Illustrative example

Suppose you also borrow 120,000,000 VND in 12 months with interest 12%/year  (1%/month).

• Monthly interest = 120,000,000 × 1% = 1,200,000 VND.
• Principal payment per month = 120,000,000 / 12 = 10,000,000 VND.
  → Total monthly payment is always fixed: 11,200,000 VND for 12 months.

4. Conditions and procedures for installment loans

4.1. Conditions

Depending on the type of loan (credit or mortgage) and the lender, conditions may vary, but in general, customers need to meet the following requirements:

• A Vietnamese citizen, living and working legally in Vietnam.
• Age from 18 to 60 years old (for employees), or up to 65 years old for business owners.
• Have a stable monthly income, prove the ability to repay debt on time (by salary, account statement, labor contract or business revenue).
• No bad debt or overdue debt on the CIC system (National Credit Information Center). Customers with a history of timely repayment will be given priority for faster approval.

4.2. Process

The current installment loan process is streamlined and digitized, helping customers easily access capital quickly. Below are the basic steps you need to know:

• Step 1: Research and choose a lender. Customers should compare interest rates, conditions and loan terms between banks and financial companies to choose the place that best suits their financial capacity and personal needs.
• Step 2: Prepare a loan application. Depending on the type of loan, you need to prepare personal documents (ID card/CCCD, household registration book, salary statement, labor contract,...) and mortgaged property documents (if any).
• Step 3: Submit application and assessment. The bank or finance company will review the application, verify the information and assess the ability to repay the loan.  Some units will also call or meet directly to check the information.
• Step 4: Sign the loan agreement. Once the application is approved, both parties will sign a credit contract stating the loan limit, interest rate, repayment period, late payment penalty, etc. Customers need to read the terms carefully to ensure their rights.
• Step 5: Disbursement and periodic payment. After signing the contract, the loan will be disbursed directly to the bank account or cash. Customers need to pay on time to avoid penalties and affect credit score.

5. How to pay installment loans

5.1. Direct payment at the bank

This is a traditional and popular form for many customers, especially the elderly or those who do not use technology much. Borrowers can go directly to the branch or transaction office of the bank/finance company where they borrow to pay cash or transfer installments.

When you come to the counter, you need to provide the loan contract number, ID card/CCCD or customer code, the staff will check the information and confirm the payment. After completion, you will receive a receipt or invoice as proof of payment.

5.2. Online payment

Online payment is becoming the most popular choice today thanks to its speed, convenience and flexibility. Borrowers can pay in installments directly through:

• Bank's Mobile Banking or Internet Banking application.
• E-wallet
• Online payment gateway or official website of the finance company.

Normally, customers only need to enter the contract number or customer code, check the amount to be paid, confirm the transaction and save the electronic receipt for comparison when needed.

6. 5+ Safe installment loan experiences

In the context of increasing demand for consumer loans, installment loans have become a popular choice to help many people quickly solve their personal financial needs. However, if not carefully researched, borrowers can easily fall into the trap of high interest rates, bad debt or inability to pay.

Below are important tips to help you borrow in installments safely, effectively and avoid financial risks:

• Compare interest rates: Check and compare interest rates between banks (low, slow approval) and finance companies (higher, fast approval) to choose the right loan package.
• Read the contract carefully: Read the terms carefully, including the actual interest rate, penalties, and repayment terms. Do not sign if you do not understand them.
• Borrow within your ability to repay: Only borrow when monthly installments are ≤ 40% of income, avoid bad debt and financial pressure.
• Choose the appropriate installment payment method: Decreasing balance or original principal balance. You can ask a consultant to choose the appropriate method.
  Beware of “0% interest”: Many programs have hidden fees like application fees, insurance, etc. Calculate the actual total cost before signing.
• Calculate total amount payable: Estimate the total principal + interest for the entire term to proactively plan spending and repay debt on time.
• Check the reputation of the lending unit: Only borrow from licensed banks and financial companies; avoid borrowing from black credit or apps of unknown origin.

7. Quick installment loans, simple procedures at SeABank

If you are looking for a reputable, flexible and fast installment loan solution, SeABank is a reputable and flexible choice for customers with installment loan needs. Banks offer many unsecured loan and mortgage loan packages to suit every need such as shopping, studying abroad, home repair, car purchase, or additional personal business capital.

Outstanding features when borrowing capital at SeABank

• High loan limit: Up to 90% of value/collateral or capital needs.
• Long loan term: Up to 60 months, helping to reduce debt repayment pressure.
• Competitive interest rates: Calculated on a decreasing balance, transparent and easy to control.
• Simple procedure: Only need ID card/CCCD, household registration book and proof of income, no complicated documents required.
• Fast disbursement: Applications are processed within 24–48 hours of completion.
• Flexible payment: Customers can pay via SeANet, SeAMobile app or at the counter.
• Professional service: Dedicated consulting, transparent process, ensuring customer rights.

Installment loan It is a smart financial choice if you understand the terms, interest rates and your ability to pay. Choosing a reputable lender, reading the contract carefully and calculating the total cost will help you borrow safely - pay on time without financial pressure. Consider carefully and use installment loans as an effective support tool to achieve personal goals and stabilize your life.

If you want to learn more about SeABank's loan products, you can contact the nearest transaction point or call Hotline 1900 555 587 or visit the website www.seabank.com.vn for more details.