If you are looking for the best installment loan, it may feel overwhelming. But it doesn’t have to be. With the right information and some careful planning, you can choose the best installment loan for you and your goals.
Installment loans are designed especially for people with less than perfect credit. You simply submit an online application, and the lender reviews the information and approves or declines your application.
If approved, you will be provided with an amount you are eligible to borrow. You must be at least 25 or older to qualify for the loan. You have several simple requirements you have to satisfy: you must be 25 or older, earn a minimum income amount set by the lender, furnish proof of identity, and provide banking institution information.
What are Installment Loans for Bad Credit?
Installment loans for bad credit are personal loans specifically designed for people with lower credit scores, or imperfect or no credit history.
Some online lenders market installment loans for borrowers with low credit scores. Some local banks and credit unions may also consider applications for personal loans for bad credit.
Personal loans for credit-challenged borrowers may be secured (meaning borrowers must put up collateral in order to get a loan) or unsecured (no collateral required). But higher interest rates are a common characteristic of both secured and unsecured installment loans for borrowers with bad credit.
Installment Loans for Bad Credit
These loans are becoming an increasingly popular solution especially for those with bad credit. These loans help people with unexpected expenses or various life needs, such as:
- Car repairs
- Medical or dental bills
- Holiday gifts or travel
- Expenses from a new baby, divorce or funeral
- Work-related expenses (electronics, tools, etc.)
- Home improvements and emergency house needs
- School-related expenses (tuition, laptop, supplies, etc. )
- Debt consolidation
Eligibility for Installment Loans for Bad Credit
Eligibility requirements for installment loans for bad credit vary by lender. You’ll usually need to provide at least the following:
- Your full name
- Age and proof of identity
- Your Social Security number
- Details about your income
Lenders may let you find out if you’re likely to qualify and check your estimated rates without a hard credit inquiry. When shopping for loans, look for lenders that provide this info with only a soft credit inquiry, as too many inquiries could hurt your credit scores.
Installment Loans for Bad Credit Versus Payday Loans
While installment loans for bad credit may have higher rates and less-borrower-friendly terms, these loans are not the same as payday loans.
Here’s how installment loans for bad credit and very short-term payday loans differ.
|Installment loans for bad credit||Payday loans|
|APRs may be wide-ranging but typically top out around 36%||APRs can effectively be close to 400%|
|Repaid in a series of fixed payments over a period of time||Repaid in a single lump sum with your next paycheck (typically two to four weeks after you get the loan)|
|Loan amounts may range from several hundred to several thousand dollars||Loans are for very small amounts (typically $500 or less)|
|Lender usually makes a hard inquiry on your credit||Lender usually does not do a hard inquiry on your credit|
|Loan repayment history may be reported to credit bureaus (could help you build your credit)||Typically don’t report repayment history to credit bureaus (won’t help you build your credit)|
Beware: Some lenders of short-term loans may blur the lines between an installment loan and a payday loan. And both online installment loan lenders and payday lenders may promise delivery of funds on the next business day.
So when shopping for a loan, don’t just focus on how the lender labels it — look carefully at the APR and repayment terms to know what kind of loan you’re getting and if it’s right for you.
Installment Loans Can Be Good For Bad Credit
It is also notable that an installment loan can be good for bad credit. Your FICO credit score is based on various factors of financial history:
- 35% Payment History – Repossessions, bankruptcy, and late payments decrease this score.
- 30% Debt Burden – Current amounts owed, number of accounts with balances, the amount paid down, etc.
- 15% Length of Credit History – Average age of accounts and age on the oldest account.
- 10% Recent Credit Searches – Large number of credit inquires can decrease your score.
- 10% Types of Credit – Different types of credit used, such as revolving, mortgage, installment, consumer finance, etc.). A healthy mix of different types of debt tends to lead to higher credit scores because it suggests that you are an informed and responsible borrower.
Credit Union Installment Loans for Bad Credit
Another option if you have bad credit: Consider going to a credit union. Rates at federal credit unions are typically lower than online lenders — and they offer payday alternative loans geared toward bad-credit borrowers.
You have to become a member of the credit union, but doing so may get you a loan specifically designed for your financial situation.
On the downside, credit unions generally use a hard credit pull to see if you qualify, which will temporarily knock a few points off your score.
First Tech Federal, Navy Federal, and USAA (which is not a credit union but has a military-focused membership) are options worth exploring if you have bad credit.
1. What is an installment loan?
An installment loan is a cash loan that you pay back with a fixed number of regular, equal payments over a set amount of time. A home mortgage, for example, is a type of installment loan.
2. Who should consider an installment loan?
An installment loan could be a good option for anyone who is building credit, needs money quickly, and can make regular repayments.
3. How do you apply for an installment loan?
In most cases, applying for an installment loan is quick and easy. Applicants for installment loans must complete an application and show proof of an active checking account.
After the lender completes their review, the applicant is notified in writing of the decision to approve or decline the loan. With RISE, installment loan customers get their money as soon as the next business day.*
The best installment loans are going to be the ones that give you the finances you need when you need them and without charging you more than your budget can handle. If you’re feeling hesitant, then remember that these companies only stay in business so long as they meet the needs of borrowers like you.
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