An installment loan with bad credit is a very feasible option for many people with credit scores that leave something to be desired. These loans let you receive the money that you need right away and repay with fixed payments.
Sometimes lenders consider your current debt and available income instead of your credit score when deciding whether to lend money to you. Let’s take a closer look at how installment loans work when you have bad credit.
What is a Typical Score for Installment Loan with Bad Credit?
If you aren’t familiar with installment loans, they are usually unsecured and have an easy application process. Fair or poor credit is not usually a hindrance because of the other factors considered.
Credit scores average between 300 and 850. When your credit score is higher, lenders treat this as a sign of reliability. Credit scores between 300 and 579 are considered poor enough that many lenders will show hesitancy to lend money. Installment loans, however, are still a possibility when factors in addition to your credit score come into play.
What Do You Need to Consider When Getting a Poor Credit Installment Loan?
Getting an installment loan with bad credit is possible, but not all online loan options are ideal choices. A careful comparison is important to make sure you get the best product for your circumstances. There are some factors that are especially important to consider.
Although it’s ideal to make your payments on time, lenders need to allow for the fact that not everybody does. Making sure you understand what any late or missed payments cost is important when weighing your options.
Another thing that you’ll want to consider is how reliable lenders you’re considering are. Customer reviews can provide a helpful snapshot of the lenders’ reliability.
The terms are important, with longer terms leading to lower payments. However, you may pay less interest on loans with shorter terms. Most lenders will help you get a repayment plan that works for your circumstances.
Interest rates will also vary, with higher costs costing more over the loan’s life. This is one of the reasons why searching for the best rates is ideal.
Pros and Cons
There are pros and cons to consider when getting installment loans. Taking both the pros and cons into account when you consider taking out a loan makes the process easier overall.
Pros:
- Fixed monthly payments so you can easily keep an eye on your budget
- Higher borrowing limits that expand what you can use your loan for
- Flexible repayment terms that you can adjust according to your needs and goals
Cons:
- Potentially high-interest rates depending on your credit profile and other conditions
- Potential fees for origination and prepayment that you need to be aware of in advance
What Are Some Bad Credit Installment Loan Uses?
Some of the most common uses for bad credit installment loans include unexpected expenses, like high tax bills and funeral costs. Medical expenses not fully covered by insurance are another important reason to get a loan. Car and large appliance repairs can also be unexpected expenses.
How Does the Loan Application Process Work with Bad Credit?
Regardless of your credit score, there are steps that are a part of the process that you’ll need to consider. Once you’ve compared your options and picked a lender, gather the documents you may need. The documents include:
- Proof of income
- Direct deposit details
- Government-issued IDs like a Driver’s License or passport
Once you’ve submitted your application, you should receive a decision quickly. After you’ve received your funds, keep track of your repayment dates so you stay current.
How Can You Improve Your Credit Score for Getting Loans?
Improving your credit score before applying for a loan is always a good idea. Approval will be easier, and you might be able to get higher amounts. Some tips for improving your credit include:
- Refraining from applying for new credit products too often
- Checking your credit reports to find inaccuracies to correct
- Trying to keep your credit balances below 30%
- Paying all your bills on time
Installment loans with bad credit are possible, contact us today to find out more about your options.
