If you need to make a large purchase but have bad credit, a bad credit installment loan might be your answer. There are many reasons why an individual might need an installment loan. Whether it be paying for a home, a car, or a college education, an installment loan provides a much-needed cash injection for individuals in need.
However, these types of lending programs usually look at a person’s score. Those who have good scores tend to get much preferable rates, while those with bad credit can get higher rates or worse, be left with access to financial help. There are new lenders now that are trying to solve this problem.
If you have a low score, you might be wondering if it’s possible to get an installment loan anytime soon. Now lenders have created specific lending programs for folks with bad credit. You will end up paying more than your counterparts with good credit, but at least there is an answer to your problems. Read on to find out.
What is an Installment Loan?
This is a type of financial product that is normally borrowed for single large purchases and where the borrower receives a lump sum. In return, the borrower is required to pay over the borrowed amount within a set period of time in installments or monthly payments.
A bad credit installment loan, on the other hand, is where borrowers are required to pay the principal and the interest in the same amount. However, payments for these are still done on a monthly basis for a long period.
There are two types of loans that fall under this category, namely secured and unsecured . Secured loans require borrowers to provide some collateral, while unsecured ones do not.
Getting an Installment Loan with Bad Credit
Bad credit installment loans are designed for individuals bearing scores below 650 or 630 depending on the bank or the lender. While most financial institutions prefer you to have a higher score, there are other lenders who take other factors into consideration.
You may apply or qualify for these if you fall under the aforementioned. Lending institutions such as direct lenders, credit unions, and peer-to-peer lending are more popular these days. Borrowerscan also get a co-signer to help them out. A co-signer should have good credit.
And just remember that whoever co-signs with you will be on the hook, if you don't pay your loan back. So not everyone is going to want to be tied to that responsibility.
Some of the places you can check out are credit unions, like the State Employees Credit Union if you are a government worker or the PenFed Credit Union if you are a veteran. For peer-to-peer lending platforms, you may also explore SoFi. Generally, the rates from 5.99% to 19.9% or higher.
To qualify for a bad credit installment loan, you should show proof of your creditworthiness such as your job history, income and salary information, list of assets, tax returns, and the like. It would also be best to disclose if you have declared bankruptcy in the past.
If approved, you can get your desired amount anywhere from $5,000 to $100,000 in your account depending on the lender and have the ability to pay within your agreed terms from 2 years onwards.
The Bottom Line
If you have bad credit, don’t be so quick to dismiss your applications and be disheartened. With these options, you can still obtain the loan amount you need while staying within your means. Just remember that when you do get a loan, you should track your expenses to make sure you pay everything back on time.
Note: All loans come with risks, please check with your lender on the details before taking any steps to apply.
