This is any loan that is repaid in regular amounts over a preset amount of time. Many installment loans are repaid in monthly installments plus interest. Some have additional fees that cover penalties and administrative costs.
An installment loan is a great way of covering large expenses and paying them back over time. Installment loans can include mortgages, student loans, auto loans, and personal loans. Installment loans can either be unsecured or secured. An unsecured loan is normally restrictive on how it is used and one does not require collateral to get one.
Some unsecured loans will need co-signers who share liability with the borrower. For people with bad credit and young adults without a credit history, a co-signer is mandatory.
Terms on many of these loans vary, many unsecured installment loans will include the following;
- The fee structure for student loans
- Repayment plan
- Term length
- Interest rate (variable or fixed)
- Loan amount
For instance, a $5,000 loan with an interest rate of 15% to be repaid over 24 months would require a monthly installment of $240. An origination fee of 3% ($150). This brings the total amount payable to $5,910. If you have the means to pay the loan earlier than the designated time, you may be subject to an early repayment fee which allows the lender to recoup interest that you would have paid if the loan was full term. A late or unsecured installment loan will subject you to fees with interest.
Pros of Installment Loans
- Longer terms for lower monthly payments
- Predictable monthly payments
- Fast access to funds
- Payback large purchases over time
Cons of Installment Loans
- Early repayment fees
- Longer terms mean paying more interest over time
- Potential negative impact on your credit score
Typical Requirements for Installment Loan Applications
Before applying for an installment loan you need to have all documents ready and ensure that you understand the requirements. This saves you time during the application process. These requirements will include;
- One must have a working phone number and a valid email address
- Must have an open bank account in good standing
- Must have verifiable and steady monthly income
- Must be a resident of the U.S (a few exceptions apply)
- Must be at least 18 years old
Typical Installment Loan Application Checklist
- Bank account number
- Bank routing number
- Proof of income
- Valid government-issued ID
Installment Loans for Bad Credit
Most banks consider a credit score below 650 high risks. Seeking a loan with a bad credit score is quite the hustle. Credit checks( hard inquiries) added to your credit report can hurt your overall credit score. Luckily there are options that are realistic for situations like these.
There are many online lenders that offer installment loan solutions, especially for bad credit. They advertise their services as a way to repair credit or build a credit score
Benefits of an Installment Loan for Bad Credit
Bad credit highly limits your financing options. Payday loans are costly and almost always offer a much smaller loan amount in comparison to installment loans that are spread out over a longer period which means more manageable payments. Installment loans are more advantageous to a borrower than payday loans in that;
- More money is available to you than a payday loan.
- Longer repayment terms than payday loans
- Funds are available within 2-3 business days
- Better chances of approval for people with a credit score of below 650
Pay Off Debt With Installment Loans
Once you find yourself in a situation where you are struggling to pay off your loans, you can take out an installment loan to consolidate and settle your debt. Some of the debts you can settle with an installment loan are;
Credit card debt
You can consolidate multiple credit card payments into one monthly payment.
Payday Loan Consolidation
You can settle all your payday loans with an installment loan
Unsecured Debt Consolidation
Loans without collateral include personal loans, student loans, medical bills, and credit cards which can also be settled with an installment loan
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