So you have poor credit. Do you know the best installment loans you can get?
Bad credit is incredibly common. In fact, almost a third of Americans have poor credit. Sometimes, your credit score may not be terrible, but it still falls short of “fair” or “good.” This can make things hard when you need loans or credit for your financial future.
However, you can still get installment loans, even with poor credit. How do installment loans work, and what are the best installment loans for you? We’ll answer those questions and more in this guide – keep reading to find out what you need to know!
What Are Installment Loans?
“Installment loan” is actually a very broad term. Most commercial and personal loans you can get are installment loans. Think of any loan that’s paid back with regular installments, or payments.
Every payment made on an installment loan includes repaying part of the total amount that was borrowed, plus paying back interest. Every schedule payment or installment can vary depending on the loan’s amount, interest rate, and term or length.
Personal loans, auto loans, and mortgages are some of the most common installment loan types. Aside from mortgages, most of these loans are fixed-rate loans. This means the interest rate on the loan always stays the same as it was when borrowing first started.
The installment payments can also stay the same from month to month for many of these loans, so it’s easy to plan ahead and pay them back.
Some installment loans are collateralized, while others aren’t. Mortgage loans use the house as collateral, while auto loans use the vehicle. However, personal loans are given with no collateral required. When a loan is given with no collateral, the lender looks at the borrower’s credit score before giving out the loan. They might also check the borrower’s assets or income for evidence that they can pay the loan back.
Typically, loans with no collateral have higher interest rates. That’s because the lender is accepting a higher risk that they won’t get paid back.
Getting an Installment Loan With Poor Credit
As you can see, installment loans often hinge on your creditworthiness. Is it possible to get one when you don’t have good credit? The answer is yes – here are the things to keep in mind.
You’ll typically apply for an installment loan by completing the lender’s application. This application usually state’s the loan’s purpose, such as to buy a car or a house. You’ll negotiate factors like a down payment, loan term, payment schedule, and payment amounts with the lender.
The lender will also check your credit score and financial standing to make their decision. If you have poor credit, it’s important to find a lender that’s known for being willing to work with people who have poor credit. Otherwise, you’ll waste time filling out an application that’s not going to get approved.
You might have to pay higher interest rates to get a loan from these lenders. But when you get a loan and pay it back responsibly, you can start to build your credit up, so you can get lower interest rates in the future.
The Best Installment Loans For You
You don’t just have to rely on payday loans if your credit isn’t great. Lenders who focus on loans for people with bad credit can help you get where you need to be financially.
Here are some of the top lenders for people with poor credit.
Avant mainly focuses on giving out unsecured personal loans. Your credit score needs to be at least 580, and your interest rates can range from 9.95% to 35.99%.
Even if you’re paying the high end of the APR, this is still a better choice than a payday loan. Payday loans can charge APRs of 400% or more! However, one issue some people have with Avant is that it only offers unsecured loans.
Secured loans using a car, a house, or another type of collateral sometimes are easier to get with a lower credit score, since you’re borrowing against something tangible. However, you can get a soft credit check from Avant for a preliminary offer to help you see if it’s worth it to apply or not.
Don’t have a high enough credit score for Avant? Then you might want to try OneMain Financial.
There’s no minimum credit score here, and you can get either secured or unsecured personal loans. If you can’t qualify for an unsecured loan, you’ll have more options with OneMain.
However, a major drawback with this lender is that is doesn’t give you the loan terms up front. If you check its website for free or interest rate information, you won’t find it.
You also can’t get pre-qualified using a soft credit check with OneMain. You’ll need to do a hard credit check (which can hurt your score) to find out your offer and the terms.
3. A Local Credit Union
Many people with poor credit have good luck getting loans from their local credit union.
Sometimes, credit unions offer “payday alternative loans,” which offer cash for short-term needs without the high APR of a payday loan. However, you’ll need to hold a membership at a participating credit union for a month or more before you can apply. If you need the loan faster, Avant and OneMain are better options.
Also, not every credit union offers these loans, and the terms vary for each one. Before you choose a credit union to join, make sure it has what you’re looking for.
Ready to Build Up Your Credit?
You’re not stuck with poor credit forever. By seeking out the best installment loans for you, you can start to build your credit back up and qualify for better financial opportunities in the future.
Want to learn more about the best personal loans for your needs? Don’t miss this post.