An Installment loan is any loan that is paid back in regular increments over a predetermined repayment period. Most installment loans are paid back monthly with interest. Some have additional fees that cover administrative costs or penalties.
An installment loan can be a great way to cover large expenses and pay them back over time. Most loans fall into the installment loan category including personal loans, auto loans, student loans, and mortgages. Installment loans can be secured and unsecured. An unsecured loan does not require collateral and may have restrictions on how the loan can be used.
Some unsecured loans require a co-signer who will share liability for the loan with the borrower. Co-signers may be necessary if you are a young adult without a credit history, or if you have bad credit.
While the terms on these loans will vary most unsecured installment loans include the following:
Anatomy of an Unsecured Installment Loan
- Loan amount
- Interest rate (fixed or variable)
- Term length
- Repayment plan
- Fee structure
For example, A $5,000 loan carrying a 15% interest rate over 24 months, would have a monthly payment of $240. Add an origination fee of 3% ($150) and the final cost of borrowing the original $5,000 would be approximately $5,910. If you decided to repay the loan early you may be subject to an early repayment fee. This allows the lender to recoup interest that would have accumulated during the loan term. If you miss a payment you may be subject to late fees with interest.
Pros of Installment Loans
- Payback large purchases over time
- Fast access to funds
- Predictable Monthly Payments
- Longer terms for lower monthly payments
Cons of Installment Loans
- The potential impact on your credit score from a hard inquiry increased DTI and late payments
- Longer terms mean paying more interest over time
- Early repayment fees
Typical Requirements for Installment Loan Applications
Before applying for an installment loan you should make sure that you understand all of the requirements and have your documentation ready. Having all of your information ready will save you time in the application process. Typical requirements include:
Typical Installment Loan Requirements
- Must be at least 18 years old
- Must be a U.S. resident (some exceptions apply)
- Must have steady, verifiable monthly income
- Must have an open bank account in good standing
- Must have a valid email address and working phone number
Typical Installment Loan Application Checklist
- Valid Government-issued ID
- Proof of income (paystub, W2)
- Bank routing number
- Bank account number
Installment Loans Online
Finding an online installment loan is convenient. Plenty of online lenders offer personal loans to consumers with fast approval and disbursement. Many of these loans are marketed as a way to build or repair credit.
One compelling feature offered by lenders during the online loan application process is a digital payment calculator. This allows you to determine your loan terms based on the amount you need to borrow, desired term length, credit score and income. A loan calculator can estimate your interest rate and monthly payment in a few seconds and help you decide on a loan amount and repayment plan that you can afford.
Benefits of Getting an Installment Loan Online
The ability to apply for a loan at home and at any time of day is advantageous for people who work long hours or don’t have easy access to brick and mortar banks and credit unions. Finding a lender online opens you up to many more lenders than you would realistically have access to in your community.
If you are struggling to pay back a cash advance on a line of credit, a credit card or payday loan you may be able to use an installment loan to consolidate your debt.
- Can help consumers build credit
- Convenience, apply for a loan at any time of day from home
- Upload documents digitally
- Funds available via direct deposit
- Digital payment calculators
- Consolidate and resolve existing debt
Installment Loans for Bad Credit
If your credit score is below 650 you are considered high-risk to most banks. If you need a loan it’s important to search for loan opportunities that are realistic for you. Applying for a loan from a lender that is likely to deny your application can hurt you in the long run. Hard inquiries (credit checks) are added to your credit report and too many can lower your overall score.
Fortunately, there are many online lenders who have installment loan solutions specifically for bad credit. Lenders who offer installment loans for bad credit often advertise their services as a way to build or repair credit.
Benefits of an Installment Loan for Bad Credit
When you have a bad credit score your options for financing can be limited. Payday loans used to be one of the few options available. If you have ever taken out a payday loan or have considered one, you probably know that they can be extremely costly. They’re also limited to a much smaller loan amount. Installment loans spread out repayment over a longer period of time than payday loans, which means more manageable payments.
- Better approval chances for people with credit scores below 650
- Funds typically available with 2-3 business days
- Longer repayment terms than payday loans
- More money available than a payday loan
Pay Off Debt with an Installment Loan
If you are experiencing financial hardship, you may be able to use an installment loan to consolidate and settle your debt.
- Unsecured Debt Consolidation - Loans without collateral including credit cards, medical bills, student loans, personal loans and more.
- Payday Loan Consolidation - Stop the cycle of unpaid payday loan debt.
- Credit Card Debt Consolidation - Consolidate multiple credit card payments into one monthly payment.
If you want to pay off your installment loan a debt relief program could help. At Accredited Debt Relief our goal is to help you resolve your debt for less than you owe. Contact us to learn how it works and for answers to your questions.