Having a lackluster or poor credit score can be a pretty big bummer, especially when you need to apply for an installment loan to help cover an unplanned expense. Plus, you might feel like you’re always stuck in a Catch-22. If you need good credit to get a loan but you need a loan to build your credit, where can you turn for help?
One option might be an installment loan for bad credit. Learn more about installment loans below, what options are available for those with less-than-stellar credit and how you can apply for a bad credit loan safely.
What Are Personal Installment Loans?
Personal installment loans are a type of credit you pay back in agreed-upon installments. You receive lump-sum funds when you’re approved for the loan. You then pay those funds back, plus any interest and/or fees, over time. Installments may be made monthly, biweekly or weekly, depending on your agreement with the lender.
What Are Installment Loans for Bad Credit?
Installment loans for bad credit are loan products designed for people who have lower credit scores and may not be able to be approved for other types of loans. These loans do typically come with higher interest rates. That’s because the lender believes it’s taking somewhat of a risk in lending you money and is using higher rates to help ensure they can cover any losses.
How Do Installment Loans Work?
While the specific details of installment loans can differ, they usually follow the same basic process:
- You apply for the loan.
- If you’re approved, the lender funds the loan. With online installment loans, this is often done via a direct transfer to your bank account.
- You use the funds you receive for any allowed purpose under the loan agreement — often, personal loan funds can be used for anything legal.
- You pay the loan back as agreed. Personal loans can take anywhere from six months to several years to pay back, depending on the terms.
- Once the loan is paid back, the loan agreement is closed. You don’t owe any more money.
- In some cases, you may be eligible to apply for another installment loan with the lender once you pay off an existing one.
Common Types Of Installment Loans
Installment loans are a common type of debt. You may already have one or be familiar with them. Some types of installment loans include:
- Mortgages, which are large installment loans used to buy a home
- Auto loans, which are also large installment loans used specifically to buy a vehicle
- Student loans, which are debts you pay off in installments, typically after you finish school
- Personal loans, which are usually smaller installment loans you can use for a variety of purposes
Benefits of an Installment Loan
Installment loans let you pay for expenses or make purchases that you don’t have the immediate cash-on-hand to cover. For example, if you need a new HVAC in your home or a repair for your car but don’t have the money right now, you might be able to get an installment loan to help cover the costs.
When you know what installment payment you can afford to make, you can pay for a large expense now and then pay the loan off over time without stressing your budget too much.
Can I Get an Installment Loan With Bad Credit?
Yes, you can get an installment loan with bad credit. You may find that your options are more limited than they would be if you had a higher credit score. Bad credit installment loans may also come with higher interest rates, but you can find options that don’t even require a credit check.
What Is Considered Bad Credit?
Bad credit usually refers to a low credit score. Typically, bad credit scores are those that fall below 600 or so (or below the high 500s). Credit in the high 500s and low 600s may be considered fair. Credit scores above around 660 are considered good.
What Are the Steps To Get an Installment Loan?
To get an installment loan, you typically:
- Research lenders and options for loans. Compare installment loans to understand how much each might cost and what the terms are. This helps you know how much you’ll need to pay back per month as well as how much you’ll pay overall for the loan.
- Pull your credit report. Understand where your credit stands so you know if you might qualify for a loan or if you need to look for bad credit installment loan options. You can get a free copy of your credit reports at AnnualCreditReport.com.
- Pick a loan that seems to match your needs. This means you think you can get approved with your credit situation and you can afford the payments.
- Apply for the loan. You may need to provide a picture ID, checking account information and an address. Some lenders may require proof of an address and verifiable income.
- Wait to see if you’re approved. Wise Loan usually lets you know within minutes if you’re approved for one of our installment loans.
How to Apply for an Installment Loan for Bad Credit
You apply for an installment loan for bad credit the same way you apply for any installment loan. However, you may want to pay special attention to lender requirements. Look for options that don’t require a credit check or specifically state that bad credit isn’t a barrier for approval.
How Many Monthly Payments Will I Have to Make?
The number of payments you make depends on the term of your loan and the amount. Short-term personal installment loans are typically paid off in six months to less than two years. Larger personal loans may take up to five years to pay off.
Can I Have Multiple Installment Loans?
Yes, you can have multiple installment loans. Many people have a mortgage, car loan and student loan, for example, and those are all installment loans.
Many personal loan lenders won’t let you have more than one personal installment loan with them at a time, though. This is especially true with bad credit loans. Lenders are already taking a risk on you and don’t usually want to extend that risk to a second loan. If you pay off the loan, you can usually apply for another one.
What Is the Easiest Loan to Be Approved for With Bad Credit?
The easiest loan type to be approved for with bad credit tends to be one that doesn’t require a credit check. Wise Loan offers loans for bad credit to help you build your credit while getting the money you need for expenses now.
Frequently Asked Questions About Installment Loans for Bad Credit
What can an installment loan be used for?
Funds from personal installment loans can usually be used for any expense you want as long as it’s legal. In some cases, lenders may prohibit some uses of funds, such as not allowing funds to be used for debt consolidation.
Who should consider an installment loan?
An installment loan may be right for you if you need money now for an expense you can’t afford to cover but you can afford to make smaller payments monthly.
How do installment loans affect your credit?
If the lender does a credit check to evaluate you for loan approval, that can slightly decrease your credit temporarily. However, if you make timely payments on your loan, the impact to your credit score can be positive. Missing payments on your loan can have a big negative impact to your credit score.
What credit score do you need for an installment loan?
The credit score you need to qualify for an installment loan depends on the lender, the size of the loan and what interest rate you want. Better terms and larger loans typically require higher credit scores. But you can find smaller personal loan options that don’t require good credit or any credit at all.
Do they check credit for installment loans?
Whether or not a lender checks your credit for an installment loan depends on lender policies. You can find installment loan options that don’t require a credit check or good credit, such as Wise Loan loans.
The recommendations contained in this article are designed for informational purposes only. Essential Lending DBA Wise Loan does not guarantee the accuracy of the information provided in this article; is not responsible for any errors, omissions, or misrepresentations; and is not responsible for the consequences of any decisions or actions taken as a result of the information provided above.