Installment Loans: The Ultimate Guide for Good Credit (and Bad Credit)

Are installment loans right for you?  Do you need financing for a long-term financial expense?

Here’s the good news…

Installment loans are the best option for borrowers that don’t have cash on hand to pay for large purchases.

Here’s why:

With an installment loan, you have the luxury of paying off the loan over time. Your loan term will vary, depending on several factors.

It’s based on the type of installment loan, your credit history, the lender you work with, and many other factors.

Here’s the bad news…

Not everyone will qualify for an installment loan.

More on that later.

Before we get into specifics, lets talk about what an installment loan is. From there, we’ll discuss the various types of installment loans.

Let’s dig in…

What Are Installment Loans?

Installment loans are loans made by lenders which are repaid over time. Your payments will include principal and interest payments. You’ll pay back most installment loans in a series of monthly payments.

Types of Installment Loans

There are many types of installment loans, depending on what are you trying to finance.

This is very important…

You should only apply for an installment loan that meets your immediate need. Do not apply for more financing than you need, especially if you have bad credit.

Personal Installment Loans (Good Credit)

Personal installment loans are the most popular type of loan. But, there are subcategories of installment loans that you should be familiar with. And, it depends on what you need the loan for.

This ranges from a new mortgage, mortgage refinancing — to car loans, student loans. And everything between.

Your first step is to find out what type of installment loan you need.

Let’s do that now.

Home Loans and Mortgages

If you are trying to buy a home and need conventional financing, then you need a mortgage. If you have bad credit, it’s likely you won’t get approved. If you’re not looking for a mortgage or home loan, skip to our next section below.

Types of Mortgages

  • Low Down Payment Home Loans
  • FHA Loans
  • VA Loans
  • USDA Loans
  • Conventional Mortgage
  • Fixed and Adjustable Rate Loans

Best For:

  • Borrowers that have average to excellent credit
  • Borrowers that have the required down payment (20% of home value)
  • Borrowers that can afford the monthly mortgage payment

Not Good For:

  • Borrowers that have bad credit, or worse, no credit
  • Borrowers that do not have the required down payment
  • Borrowers that cannot afford the monthly payments

Home Remodeling Loans

Need a loan to remodel your home? Remodeling your bathroom, kitchen or building a new addition?

Then, you’ll want an installment loan. Most home improvement loans fall into one of these loan categories:

  • Personal Loan
  • Second Mortgage
  • HELOC (Home Equity Line of Credit)
  • Home Equity Loans

Best For:

  • Borrowers that have good to excellent credit
  • Borrowers that are also homeowners
  • Borrowers that have equity in their home

Not Good For:

  • Borrowers that have bad credit, or worse, no credit
  • Borrowers that are not homeowners
  • Borrowers that cannot afford the monthly payments

Car Loans

Looking to upgrade your ride? Or get your first car?

Then you’ll need an auto loan. To get the best car loan rate, you’ll need good to excellent credit.

Auto loans are installment loans.  And if you have good to excellent credit, you’ll have no issues in the approval process.

If you have bad credit, or not credit at all, see our section below about “Bad Credit Car Loans” below.

Student Loans

Tapped out on loan resources? Exhausted all options such as grants, scholarships and federal loans?

You may want to look at a private student loan.

Top Lenders for Private Student Loans

  • Sallie Mae
  • Discover Student Loans
  • College Ave
  • Common Bond
  • PNC Bank

Note: the above lenders may not be an option for people with bad credit. Skip to the section below about bad credit student loans.

Medical Bill Loans

Are medical bills stacking up, collecting dust? Debt collection agencies after you to pay up?

Or do you have an upcoming medical procedure you need help to pay?

You may want to look into a medical loan.  Either of these are good reasons to look into an installment loan.

Top Reasons People Get a Medical Loan

  • Medical bills piling up
  • Cosmetic procedures
  • Weight loss surgery
  • Urgent care
  • LASIK surgery

Note: you will need average to excellent credit in most cases to get approved. If the bill or procedure is under $1,000, you should look into a bad credit installment loan. And then, pay it off as soon as you can.

Bad Credit Installment Loans

According to FICO, 68+ million Americans have bad credit. This represents around 25% of the U.S. population. That said, if you’re looking for a bad credit installment loan…there’s a few things you should know.

  • You can’t use a bad credit installment loan to buy a house
  • You won’t get the best auto loan rates
  • You won’t get the best rates and terms on personal loans
  • You’ll pay very high interest rates and fees
  • You have a greater chance of digging deeper into debt

I can hear you now…

“So, what type of loan can I get if I have bad credit?”

You have a few options, which we explore below. The most important thing to point out here is this: your interest rates and fees could be in the triple digits (or higher). Proceed with caution.

Tribal Installment Loans

Did you know sovereign Indian tribes can lend you money? Even if you have bad credit?

Well, they can. And here’s the deal:

Native American tribes offer tribal installment loans. They operate outside of U.S. federal and local state laws.

They charge very high interest rates, sometimes in the triple digits…or even higher.

It’s ok if you have bad credit. Most lenders only want to know you have a job or source of income, and a valid drivers license.

That and an active checking account.

Tribal installment loans are best suited for borrowers that meet this criteria:

Best For:

  • Borrowers that have a 620 credit score or lower
  • Borrowers that need a loan under $1,000
  • Borrowers that have short-term financial expenses
  • Borrowers that understand they will pay a premium for a loan (high interest and fees)

If you fall into any of the below categories, you should not get a tribal installment loan:

Not Good For:

  • Borrowers that have good to excellent credit
  • Borrowers that need long-term financing
  • Borrowers that don’t agree with the high interest rates
  • Borrowers that can’t afford the monthly payments

Online Installment Loans

Online installment loans also fall into several categories. But most people searching for an online installment loan have bad credit. That said, you should know, right off the bat, you won’t get a mortgage or an auto loan with the best rates and terms.

Applying for an online installment loan is simple. Go to any lender that offers installment loans and check to make sure of the following:

  • The lender has a secure website and application to process your information
  • The lender offers direct deposit into your bank account. You’ll need an active checking account
  • You have a valid U.S. driver’s license to prove your identity
  • You have a job or other source of consistent income

Bad Credit Car Loan

If you need a bad credit car loan, you should know, right away, you will not get the best rates. So, throw that idea out the window. You’ll pay a much higher premium than someone that has good to excellent credit.

That said, here are a few options to help you get a new ride:

Car Dealerships (New Cars) – Sometimes, new car dealerships want to make a deal–even if your credit sucks. And if you have a trade-in, this increases the likelihood that you’ll get approved. New car dealerships finance in-house, or send your application to a network of lenders.

Note: this only works with new cars. New car dealers often offer special financing from the manufacturer. And they want to meet their sales quotas for the month.

Buy Here, Pay Here Car Lots – You won’t get a new car here, but you can find a reliable preowned vehicle that gets you from point A to point B.

If you go this route, here’s what you’ll need:

  • A valid driver’s license
  • A job or other source of income
  • Proof of car insurance
  • A down payment or trade-in

But, here’s the bad news:

If you end up not making payments, expect your car to get repossessed. This can happen with a traditional car loan, but a buy here, pay here car lot will come after it much sooner.

Bad Credit Home Loan

If you’re looking to buy a home with bad credit, there’s few options available. But that doesn’t mean you should lose hope.

Here’s a creative idea you can try:

Buy a Rent-to-Own Home

When you buy a home, rent-to-own, you’re renting it…with the intention of buying it at a future date.

Here’s how it works:

  1. Find a home listed as FSBO (For Sale by Owner)
  2. See if they are willing to setup seller financing or what’s called a “Lease to Own”
  3. When you find a home, all you have to do is prepare a lease to own agreement. You and the seller will agree on terms and you’ll be a proud homeowner.
  4. Some sellers use your rent payments, or a percentage of payments, as a “down payment” over time.

Note: while you are doing this you should work on repairing your credit. You will need to get a mortgage at a later date to make it official.

Bad Credit Student Loans

Looking to get more education to better your life, but your credit stinks? You’ll may want to look at a bad credit private student loan.

But first, make sure you have exhausted all other resources. resources like: grants, scholarships and federal loans.

If you’ve done that, you can try the options below:

  • Federal Direct Student Loans (known as Stafford Loans)
  • Perkins Loans
  • Ask a relative or friend to co-sign

Top Reasons to Get a Bad Credit Student Loan

  • Medical School Loan
  • Dental School Loan
  • MBA Loan
  • Undergraduate Loan
  • Graduate Loan
  • Career Training
  • K-12 Loan
  • Law School

Installment Loans You Should Avoid

You should avoid any lender that:

  • Has interest rates higher than triple digits
  • Offers car title loans
  • Offers payday loans
  • Doesn’t explain the rates and terms
  • Doesn’t have clear information on their site
  • Doesn’t have a secure online application
  • Operates as an illegal loan shark
  • Offers long, drawn out repayment terms
  • Offers a loan over $1,000

Advantages of an Installment Loan

If you have good credit:

  • No collateral needed on unsecured loans.
  • The best rates on a mortgage.
  • The best rates on a car loan.
  • Extended time to pay off the loan.
  • Can often get 0% financing on qualified purchases.
  • Qualify for higher end purchases.

If you have bad credit:

  • Gives you much more time to repay the loan
  • Can help you rebuild credit if you pay on time
  • Can get quick access to funds for an emergency expense
  • No collateral needed (only your valid checking account)

Disadvantages of an Installment Loan

If you have good credit:

  • You may need to put up collateral, depending on the type of purchases .
  • You’ll pay more in interest if you don’t repay the loan as soon as possible.
  • May reduce your credit score.

If you have bad credit:

  • Can dig you deeper into debt
  • Comes with very high interest rates
  • Many lenders are very shady
  • Limited in how much you can borrow

How to Get An Installment Loan

Still here? Good. Now that you understand installment loans, you may wonder:

“How do I get an installment loan?”

That’s a great question. Here’s how to apply for an installment loan:

If you have good credit:

  • Determine the type of loan you need (home auto, personal, etc)
  • Shop around for the best rates and terms
  • Complete an online application at the lender’s website. This is sometimes called the “pre-approval” process
  • Depending on the type of loan and lender, it could take several days to several weeks to get your funds

If you have bad credit:

  • Gather up the following documents: driver license, employment information and checking account information. You’ll need these to apply
  • Research bad credit installment lenders to get the best rates and terms

Conclusion

Installment loans are for people with excellent credit and bad credit alike.

Is there anything we missed? Let us know in the comments.

Can we improve this page? Let us know in the comments.

Got a bad credit installment loan tip? You know what to do…

Need an Installment Loan?  Read Our Ultimate Guide to Get The Best Rates and Terms.  Works for People With Good Credit or Bad Credit. #loans #installmentloans #badcreditloans