An installment loan enables borrowers to access funding and spread their repayments over the course of several months or even years. This provides borrowers with the flexibility that they need to repay their loans at a reasonable pace rather than having to pay the loan in its entirety, like with payday loans.
These types of loans can also be secured or unsecured, depending on the loan amount, the duration, and the borrower’s credit rating. They can also be used for any type of purpose such as debt consolidation, car purchases or repairs, home renovations or repairs, travel & holiday costs, etc.
While these loans are typically offered by traditional lenders like banks and credit unions, they can also be obtained using installment loan service providers like US Installment Loans. These services are designed to quickly connect borrowers to online lenders that are even open to approving those with bad credit.
Can I Obtain an Installment Loan with Bad Credit?
Yes. Online services like US Installment Loans can help you find reliable loan providers that are willing to provide you with the funding you need, even if you have a less-than-stellar credit history.
In fact, these types of loans are best suited for borrowers with bad credit who may be looking for a way to improve their credit ratings. This is because making consistent, on-time payments to lenders for the duration of the installment loan will usually be reported to the relevant credit bureaus.
However, this also means that failure to make your repayments can further damage your credit score, so you should only borrow these loans if you are confident you can afford them. You should also keep in mind that your credit score has a huge effect on how much money you can qualify for when borrowing from online lenders.
This means that the lower your credit score is, the lower your chances are of securing a large sum of money. In such situations, a viable option is to apply for a secured installment loan, which involves putting up collateral like a car to reduce the level of risk to the lender.
Owen Wilcox, the co-founder of US Installment Loans, also went on to state recently, “We have partnered with over 100+ loan providers to ensure that our users have an opportunity to easily access both secured and unsecured loan products, even with a bad credit score.”
What Are the Eligibility Criteria for Installment Loans?
The benefit of applying for an installment loan online is that the eligibility criteria will usually depend on a wide variety of factors, not just your credit score. For instance, most online lenders will factor in your income level, employment status, debt-to-income ratio, and more to determine if you qualify for a loan.
However, the basic criteria that one is required to meet to submit an application successfully are:
- Being a US citizen/permanent resident.
- Being over 18 years of age
- Having an active bank account
- Having a steady income stream
What To Be Aware Of When Applying For An Installment Loan?
If you intend on getting an installment loan, your main priority should be to secure yourself an interest rate that makes it easy for you to make affordable monthly payments. And as mentioned before, most direct lenders typically factor in several different aspects when evaluating what kind of loan and interest rate you qualify for.
In fact, the loan terms and repayment duration may also end up varying based on your credit history. In this respect, it is often a good idea to try and improve your credit score before applying for an installment loan, which should help you secure lower interest rates and APRs. You can easily check your credit report online to see where you stand.
Something else to take into consideration is the fact that while short-term installment loans have higher interest rates, they are often cheaper because there’s less time for interest to accrue. Some people prefer repaying the loan quickly, while others would rather stretch it out for smaller installment payments.
Whichever option you choose, you should ensure that it fits well within your budget so that you can meet your payments on time and avoid any issues with the lender. Aside from that, you should also remember that the borrowed installment loan amount will usually be fixed.
This means that unlike credit cards or a line of credit, you will not be able to secure flexible terms, so you need to be confident of how much you need before borrowing. This means taking the time to evaluate your financial needs to determine how much you can actually afford to borrow.
What Are The Pros and Cons of Installment Loans?
Pros
#1. Fixed monthly payments
Since these types of loans tend to come with fixed interest rates, your APR will usually remain the same throughout the life of the loan. As a result, you will be paying the same amount per month, which should make it easier for you to stick to a budget.
#2. Facilitates refinancing
If you initially had a poor credit score when applying for an installment loan but it has since improved, you can choose to refinance your debt. This can allow you to secure low interest rates and even better repayment terms than when you first applied for funding.
#3. Improves your credit score
If you consistently make on-time payments to your installment loan and your lender reports to the relevant credit bureaus, then your credit score may gradually start to increase. This should make it easier to secure better credit rates and terms in the future.
Cons
#1. High-interest rates and fees
Many types of installment loans, especially those from bad-credit lenders, typically come with high fees and interest rates. For instance, you may end up having to pay an origination fee that typically ranges between 1% and 8%.
You may even be charged a pre-payment fee, which, as the name suggests, is sometimes applied if you end up paying off the loan ahead of schedule. These fees are usually put in place by direct lenders who are looking to recover some of the interest payments that they end up losing when you pay your loan off early.
#2. Fixed loan amounts
As mentioned before, if you’re unsure of how much you need, installment loans can be a bad fit because the funds will usually be made available in the form of a single lump sum. This may end up forcing you to seek out other forms of credit if you end up needing more money.
For example, if you borrow $10,000 to rent your home, only to find out you need an extra $2,000 later, this can end up placing you in a rather inconvenient position.
Conclusion
All in all, the information shared above should help you make a well-informed borrowing decision. And if you do decide that an installment loan is the best option for you, then you should consider using an online credit broker like US Installment Loans.
This will ensure that you not only connect with legitimate online lenders but are also able to compare multiple offers to find the best rates and fees.
