An installment loan is a perfect option to cover home renovation expenses, a car purchase or any other type of urgent costs. It is an easy and available way to get necessary cash quickly. This type of loan is designed for a single large purchase. After getting approved by a lender, the borrower receives cash and agrees to pay off the loan over a set term in monthly payments, or installments. An installment loan account is closed once the loan is fully repaid.
Reputable installment loan lenders offer sufficient loan amounts and repayment conditions, along with accessible requirements for easy approval online and affordable interest rates. This type of online loans implies the benefit of set interest rates and fixed monthly payments. This allows a borrower to know how much he needs to refund each month and when the final repayment term is. Let’s imagine an applicant needs to borrow $30,000 with a 10.99 % APR and a 60-month repayment period. His online loan monthly payment is $652.12 for five years.
Installment loans are typically obtainable from traditional financial organizations like banks and credit unions, as well as online lenders. A potential borrower applies for a loan and then goes through the approval and verification process. Money is transferred to the borrower’s bank account and interest starts to accumulate in the first month. Loan payments are generally made monthly over the term of the loan. The duration is usually between a few months and seven years.
The sum that an applicant can borrow depends on his credit score, amount of income, and personal financial situation. If a potential borrower has short or no credit history, the lenders base their decisions only on income. But if an applicant’s credit score is enough, he can expect to qualify for a larger sum of money. Meanwhile, if a borrower’s credit is low, a longer repayment period may be a good choice since it will give time to create a credit history.
What are the advantages of getting an Installment Loan?
When making serious financial decisions it is important to consider all possible outcomes. Before applying for an installment loan, you should weigh your possibilities and estimate your financial situation. If applying for an installment loan can help you to cover your needs, then taking out this type of loan is a good idea. An installment loan is also your option if you choose set monthly payments.
When you are finally ready to apply for an installment loan, plan your budget thoroughly and make sure you can afford to refund the loan each month. If it happens, that you default on loan repayment, a serious damage can be caused to your credit history. Therefore, chances of getting good terms in the future become less.
Installment loans are the right choice for a borrower that has enough finances to pay off the loan in limited time. Debt consolidation is also a strong reason to get the loan. This can make it possible to repay the debt more quickly.
How to qualify for an Installment Loan?
Financial organizations make lending decisions based on the risk a potential borrower represents. Applicants with high credit score and steady source of income are usually considered more reliable. Therefore, more chances to make payments on time appear. Risky applicants are hard to deal with and lenders want to secure the loans from default. Therefore, borrowers with good credit scores can expect bigger loan amounts and the most affordable interest rates.
Minimum credit score required for good rates and terms are at least 600. Lower rates are considered to be bad and not all lenders offer bad credit installment loans. Mind that lenders can also demand a maximum DTI ratio, usually up to 43%. This determinant shows the part of a borrower’s earnings that goes to monthly credit payments.
What do I need to apply for an installment loan?
The requirements may vary from lender to lender. Your state’s legislation may also influence the conditions. However, there is some basic information any borrower needs to provide:
- Be of legal age or older
- Be a resident of the state you apply in
- Provide a valid Social Security Number or Individual Taxpayer Identification Number
- Provide an active e-mail address
- Valid phone number
- Proof of steady income
- Active bank account opened for at least one month
Can You Get an Installment Loan With Bad Credit?
Applying for an installment loan with bad credit can be difficult, but it is not impossible. Many lenders work with low-credit borrowers and demand, therefore, more relaxed requirements than traditional financial organizations. In this case, a score below 600 will be enough to qualify. However, the bad credit borrowers should expect higher interest than reliable borrowers receive.
Bad credit lenders also consider alternative personal and financial information that makes it easier for less trusted borrowers to qualify. The information usually includes rental bills, utility payments and bank account documentation.
A bad credit borrower has to remember that except for finding the possibility to borrow money, it is more important to be confident that you are borrowing for the decent reasons.
There are different requirements for bad and good credit borrowers. However, some requirements essential for both types of borrowers exist. First of all, any type of borrower has to be at least 18 years old or more. It is illegal in the US to give out money to underage applicants. An American citizenship is also required. A borrower will be asked to provide a copy of identification to help prove these things. A source of steady income is another important criterion. It can show that a borrower is able to make monthly payments. Some lenders also prefer secured installment loans, which require a collateral.
Installment loans for bad credit may not require much more paperwork than any other type of loan. However, a borrower must be prepared to provide some financial information, such as payment slip or last bank statement.
Are there any Online Installment Loan Alternatives?
In case banks refuse you quick-cash financing, there are always other options to meet your emergency financial needs:
- Apply for a personal loan online. It will let you get up to $35,000 at lower interest rates.
- If you need a small-dollar loan up to $1,000, Online Payday Loans will suit you perfectly.
- Credit card. It is cheaper if you can repay the card balance within 30 days till the interest starts to be charged.
- If you own a lien-free car title, use it to secure a Car Title Loan and get up to $10,000 instant cash same day.
- If you are a member of a credit union, consider borrowing form them.
- Ask your relatives or friends for help if it’s not too embarrassing and is not going to hurt your relationships.
- Make some extra cash with side gigs.
- Ask your employer for a payday advance.
- Apply to non-profit financial organizations for emergency relief assistance.
- Pawn some unnecessary items.
Online Installment Loan Questions Answered by Prof. Thomas Wright
Do Installment Loans differ from Payday Loans?
These two types of loans are very similar, because both of them considered to be short-term. In both cases a borrower takes out money for a fixed interval. However, some important differences between an installment and payday loan exist. For instance, when applying for an installment loan you can expect to be given a larger sum of money than a payday loan but over a more extended period of time.
What credit score do you need to qualify for an installment loan?
The requirements for obtaining an installment loan differ from lender to lender. Your state’s laws also regulate fees and terms. However, a potential borrower should have at least 600 credit score to get an installment loan with affordable conditions. Some creditors, who work with bad credit online loans, accept applicants with scores close to 550. But an applicant should consider that applying for a bad credit loan implies significantly higher interest rates. Borrowing limits are also to be expected for applicants with bad credit scores.
Can I get an Installment loan with no credit check?
Many borrowers afraid that a credit check will negatively influence their credit history. No-credit-check installment loans are a solution for such applicants. It is considered to be easier to obtain an installment loan without credit check, especially for borrowers with a far from perfect credit score. In this case, a lender uses alternative methods to estimate borrower’s creditworthiness. Factors like steady source of income and absence of outstanding loans are taken into account. Consider that a no-credit-check installment loan goes with unfavorable terms and fees.
What will happen if I default on installment loan?
Prepare for credit score damage in case of not paying the loan on time. This will lead you to being a riskier candidate for approving for any kind of loan in the future. This means that favorable rates and terms will not be available for you. It can even lead to a complete rejection in the future. If your loan was secured with a collateral, expect the confiscation of it. A lender will use it to cover his losses.
How much can I borrow with an installment loan?
Usually installment loans online range from $500 to $10,000. However, several factors can influence the amount of loan you will receive. Your income and credit rating are among them.
Why installment loan lender needs the information about my income?
Analyzing the information about your income allows lenders to specify the amount of money you’ll receive and repayment plan that will best fit your personal financial situation. It is important to get suitable rates in order not to ruin your monthly budget.
Can I pay off my loan early?
Every lender sets his own terms. Before signing a contract check whether any prepayment penalties are implied.
What are the advantages of an installment loan?
First of all an installment loan is a quick way to get a necessary amount of money. The process of application and approving takes a few moments. Nowadays it is possible to apply online. Consider the fact, that installment loans can help you to build up you credit. Try to follow the repayment plan and get the chance to receive better rates for the future loans.
What is APR?
APR or annual percentage rate is the charge for borrowing an installment loan. This determinant often varies from lender to lender. Financial organizations take a credit score into account when setting APR, with a higher credit score usually converting to a lower interest rate.
Can an installment loan influence my credit history?
Primarily, applying for an installment loan does not have any impact on a borrower’s credit history. Many lenders do not run hard credit checks. However, if a borrower defaults on a loan repayment it will significantly damage credit history, down to total rejections from other lenders in the future.
What should I do if I am late on my payment?
Lenders understand that it may happen that a borrower needs some additional time to get all the necessary funds to make a payment. They offer different solutions to such situation with understanding that installment loan is a financial obligation that cannot be avoided. First thing a borrower should do when realizing that there is no possibility to make scheduled payment is to contact the creditor immediately. A lender, in his turn, should offer alternative payment arrangements and a commitment date for making the scheduled payment. It is important to review the contact to understand the full range of possible outcomes, before signing it.
An installment loan is a great opportunity to reduce a financial stress. Almost any expense can be covered with the help of this loan. Before signing a financial agreement, a borrower must familiarize himself with all installment loan’s terms and conditions, including its APRs. It is also efficient to shop around for different loan options to see which lender offers the best rates.
Choose a well-managed loan, so it becomes your life-saver. As long as you borrow within your means, the loan cannot be something to worry about.