When a certain amount of money is urgently needed and one’s funds are not enough, many people turn to banks for conventional loans. Well, this is the first thing that comes to mind. But what if your credit history is bad and there are delays? In this case, it is best to resort to online installment loans for bad credit.
What they are
An installment loan is when you receive funds at once and repay them in fixed payments (installments). This is similar to regular credit cards, but there are some important differences. The thing is, with credit cards, you would repay continuously and over a long period (but you would use them on an ongoing basis). On the other hand, installment loans are paid off in one lump sum.
How it works
Once an installment loan application is approved, a lender transfers funds directly to your bank account. You then repay the amount borrowed, along with accrued interest, over the term specified in the agreement.
Thus, if you secure a $20,000 loan with a four-year repayment term and a 12% APR, you would make 48 installments of $527. To gauge how the loan’s interest rate and repayment period will affect your monthly payments, an installment loan calculator can provide some insight. By the way, paying off your loan on time will help your credit score, while missing payments can hurt it.
How much can I borrow with an installment loan?
Up to 100 thousand US dollars. This amount can be repaid within two to seven years, and the annual percentage rate varies from 6% to 36%. All these conditions should be clarified with the one who will give you this loan.
How can I increase my chances of getting it?
Of course, your credit history can be bad, especially if it is 650 or even lower. However, you can still improve your situation. To do so, do the following:
- Consider co-signing. Adding someone with a higher credit score or income to your application can improve your chances of getting a loan. This may sound uncomfortable or even dangerous, but in reality, your co-borrower will only have shared access to information. They won’t be able to access the funds, but they will be obligated to repay them (unless you do it yourself).
- Pledge something. You can pledge something as collateral for the loan, such as jewelry or a car. Of course, we do not advise you to mortgage your home, and it is unlikely that you will need it. This is a very risky option, even the most extreme one. If you stop paying, the creditor will repossess what you have pledged. Weigh the pros and cons before making such a decision.
- Limit yourself to a smaller amount. Lenders try not to lend too much if they suspect you will not be able to repay them. Make life easier for both you and them by borrowing a smaller amount initially. You can catch up later by combining the installment loan with alternative loans.
What to look for when choosing an installment loan
Below is a list of factors that should be your first priority when choosing an installment loan:
- Interest rates: It’s important to note that the lowest interest rate advertised by a lender is not guaranteed. When evaluating offers from different lenders, be sure to compare the fees that each lender charges.
- Loan amounts: Different lenders offer different loan amounts. Some may focus on smaller amounts, while others may offer loans up to $100,000. Before applying, it’s important to check the minimum and maximum amounts to make sure they match your needs.
- Repayment options: Personal loan lenders offer repayment options that range from two to seven years. Opting for a longer period will reduce your monthly payment, but choosing a shorter period can significantly reduce the total amount paid.
- Unique features: Look for special features and benefits, such as introductory APRs, discounts, and online financial tools. These can add significant value.
Are there alternatives?
Actually, yes. You should not always resort to installment loans. Consider other options first:
- Ask local nonprofit, charitable, and religious organizations for help.
- Try to get a paycheck in advance.
- Try other ways to make money.
- Ask family and friends for a loan through a lending circle or family credit agreement.