Best Installment Loans for Bad Credit in 2020

A poor credit score varies from lender to lender. Home mortgage lenders tend to consider anything under 620 a poor credit score. Other lenders can consider a score that’s 640-680 to not be ideal.  Poor credit can impact your life such as halting you from getting that dream car or home.

You might find it hard to:

• Obtain affordable car insurance
• Have cell phone contracts
• Secure student loans

Credit bands are typically batched in the following manner:

• Excellent credit tends to be considered 800-850
• Very good credit is normally 740-799
• Good credit is 670-739
• Fair credit is 580-669
• Poor credit is under 580

While it’s harder to get a loan with poor credit, an installment loan may be possible. Lenders will check your credit score, the money you make, and employment. Your credit score normally isn’t factored in whether you’ll be approved or not. There are even specific installment loans that are made for those with poor credit. Some personal installment loans might be what’s known as secured loans.  Secured means you’ll have collateral the lender can seize if you don’t pay. Whereas an unsecured loan does not have that setup. Keep in mind that with poor credit, you might have higher interest rates with loans.

Installment loans work by having you repay the loan with installments or regularly scheduled payments. You’ll need to pay toward the principal amount plus interest.  The amount of the loan payment depends on the interest rate, length of the loan, and amount of it. Some examples of installment loans are personal, mortgage, and auto loans.  They tend to have lower interest rates and flexible terms. Disadvantages include loss of collateral (if it’s a collateral loan) and the risk of defaulting.  Most installment loans are what’s called fixed-rate loans which means the interest rate is fixed over the term of your loan. Since the interest is fixed, it’s a great way to budget for this option.

When you’ve decided you can do monthly installment loans for poor credit, you’ll want to either go online or visit your credit union or bank.  Tell the lender about your situation and that you’re looking to apply for an installment loan. Credit unions have plenty of options when it comes to unsecured and secured loans.  You might be able to find a lender faster online than the traditional route. Some employers also offer loans to their employees. You probably don’t want to go with the employer route if you haven’t worked there for long.  If you have collateral (equity in your home, electronics, or a paid car), it’ll be easier to be approved for a loan.

If you can’t pay your installment loan back, as far as what happens depends on if you went with a secured or unsecured loan. For a secured loan, the lender will seize your collateral. They could take you to small claims court to make up for their losses.  Before getting to this point, if you can’t pay off your installment loan, speak to your lender immediately. You can ask them what your options are or if you could have more time.  They can roll your amount due into the next month where you’ll pay double to make up for the amount missed. You can also consider what’s called a deferment. This stops payments temporarily until you’re financially secure to pay it off.  Another option is for you to consider debt consolidation. This will reconsolidate due dates, interest rates, and bills into one.

Yes, you can have more than one installment loan. To do this, you normally need some trust built up financially for the lender. If you can prove you’re paying your first installment loan on time, you’re more likely to get approved for a second.  You can also consider choosing multiple lenders for different loans.

If you’re looking to pay off your installment loan quickly, one method is to round up your payments. During each payment cycle, try to add a bit more money each time to get it paid off quicker and avoid racking up more interest.
You can also earn extra cash whether that’s bringing people around in your car such as Lyft, or delivering groceries. Or consider a second job. The additional income you make you can put toward your loan to pay it off faster.  If you can, try to double your payments or ask about different discounts you can save. Sometimes, if you sign up for automatic payments out of your checking account, you can save on certain fees.

Before signing on the dotted line, check out multiple options for the best installment loans. Ensure you understand the fees such as an origination fee.  An origination fee is a fee that’s charged to cover the cost of processing the loan.
When you sign up, see how long you have to pay off the loan. Keep in mind that the longer it takes, the more interest you’ll pay over time.  Certain lenders offer perks for borrowing money. See which lenders will send the money straight to creditors for you. Some might let you change your due date.  Most importantly, check the different rates for each loan. Keep in mind that unsecured loans have higher rates than secured since there’s more risk involved.

You can find payday loans at loan agencies and online. The interest and fees associated with payday loans tend to be high since there’s no collateral.

Payday Loan pros

• Lenient option
• Convenient since located all over the U.S. and online
• Obtain them quick
• If you have a stable job, it’s easy to obtain one

Payday Loan cons

• There are some scams out there so you must be vigilant
• You need to plan to avoid living paycheck to paycheck
• It’s more expensive since the interest rates are extremely high
• Installment loans can be unsecured or secured, and more short-term
• While the interest rates are high, they tend to be less than payday loans
• You’ll agree to pay the amount by a certain date in multiple payments

Installment Loan Pros

• There can be longer terms since it takes longer to pay it back
• It’s quick and convenient to apply and receive the money
• Since the interest rate is fixed, you can know how much you’re expected to pay monthly

Installment Loan Cons

• Some require you to add collateral which you can lose if you don’t pay
• High interest
• There are penalties if you miss a payment date

When deciding which is right for you, keep in mind that defaulting on payments can negatively affect your credit score. How low your credit score is might affect if you’ll qualify for an installment loan.
If you’re looking to pay the money back over time, then installment loans are a great option. If you’re looking to pay it all off at once, payday loans might be a better option.

There are alternatives to installment loans if you feel they’re not the right fit for you. You can ask friends and family for a loan through a loan agreement.  You can also get a pawnshop loan by using collateral. Another option is to reach out to different religious or charitable organizations.

Installment loans can affect your credit negatively if you don’t pay them on time. To avoid missing payments, sign up for autopay, and then it’ll automatically come out of your account.

Whether you’re looking for debt consolidation or help with car repairs, installment loans can help. Sometimes unforeseen medical expenses can creep up and these loans are a great way to pay for them even if you don’t have the best credit score. 

Other examples:

• Work expenses
• Home improvement
• Home emergencies
• School expenses
• Dental bills
• Life events such as funerals, divorce, or a newborn

It’s also a common loan for auto loans and home loans. If you need a personal loan, turning to installment loans could help since you can pay it off over time. For those who are looking to go back to school, you can take out student loans as an installment loan.