Unlike payday loans for bad credit, installment loans for bad credit can be more affordable and less risky. Surprisingly, some creditors offer installment loans without conducting a thorough credit check.
Lenders will collect other information such as your income, monthly transactions, and total debt. These pieces of information help lenders to get to the bottom of your financial behavior and aid in qualifying you.
Looking for the right installment loan can be particularly difficult for those with bad credit. For a little help, here’s a rundown of things you need to know before you decide whether an installment loan is right for you. Read on!
Choosing An Installment Loan
The following are important steps you should do to choose an installment loan:
Understand The Fees
Some creditors charge an origination fee. The origination fee is one percent to six percent of the loan amount. Further, other lenders charge a prepayment fee for paying your loan early. An important reminder: do not agree to borrow money if all the fees, hidden or not, are not disclosed.
You can check this link to find out more about loans online here and learn about what you need to know about online installment loans.
Compare Interest Rates
Did you know that the most borrower-friendly loans arrive with annual percentage rates between six percent and thirty-six percent? For all unsecured loans, it is best to compare interest rates at various lenders.
In this way, you can look for the lowest interest rate possible for the loan amount you need. Most creditors enable you to look over your interest rate without impacting your credit score.
Explore Lender Perks
A few creditors provide features fitted to the reason you are borrowing money. For example, if you choose to consolidate debt, some creditors will submit the loan money to lenders on your behalf. On the other hand, other lenders might permit you to alter your due date or provide a hardship plan if your financial picture changes.
How Installment Loans Impact Your Credit
Keep in mind that loans can either hurt or help your credit. It’s one way or the other, basing on how you use the loan. Loans give you the chance to enhance your credit and manifest financial responsibility by making timely payments.
However, if, for instance, you fail to repay the loan or miss a payment, your credit score could adversely suffer. The best way to ensure your payments are always on time is to opt for autopay or automatic payment.
Most creditors provide an annual percentage rate discount for borrowers that make use of autopay. Moreover, for debt consolidation loans, some creditors directly send your payments to lenders. Thus, you have nothing to worry about and don’t have to do it yourself.
Pros And Cons
Installment loans can easily be customized to the specific needs of the borrower with regards to the length of time and loan amount that best matches the ability of the borrower to pay off the loan. This type of loan allows the debtor to get financing at the best possible low rate compared to what’s normally available with credit cards and other revolving credit financings.
For this reason, the debtor can keep more money on hand to use for other expenses, instead of making a huge expenditure. Moreover, for long-term loans, a significant drawback is that the debtor may be making payments on a fixed-interest loan at a high-interest rate compared to the existing market rate.
The debtor can refinance the loan at the existing lower interest rate. Other than that, another disadvantage of installment loans originates from the debtor being latched into a long-term financial obligation.
In any case, circumstances may make the consumer incapable of making timely payments. Therefore, risking default, which might lead to forfeiture or loss of any collateral used to make the loan secure.
Other Options For Bad Credit
If you need money right away but have bad credit, it would be best to take the time to research other low-cost options or alternatives to installment loans. Other creditors that offer title loans or payday loans may promise painless, fast approval. However, the truth is that borrowers may end up paying more in fees and interest rates.
The following are alternatives to installment loans:
- Get a side job.
- Seek help from religious organizations, charities, or local nonprofits.
- Get a pawnshop loan.
- Ask your family and friends.
Takeaway
Installment loans for bad credit are particularly personal loans intended for borrowers with an imperfect credit history or low credit scores. Some online creditors offer this type of loan for people with low credit scores. The common features of bad credit installment loans are loan amounts, repayment schedules, and fixed or variable interest rates.
Keep in mind that interest rates can differ from creditor to creditor. That said, always be wary and take your time so that you can successfully find the lowest interest rate possible.
