Best installment loans for bad credit


Credit Union Installment Loans For Bad Credit

In addition to online lenders, consider a credit union for installment loans if you have bad credit. Federal credit union rates are generally lower and they offer alternative payday loans geared towards bad credit borrowers.

You must become a member to get a credit union loan. Typically, credit unions use hard credit to see if you qualify, which will temporarily lower your score by a few points.

How to choose an installment loan

Compare annual rates as a percentage. The cost of a loan is often expressed in annual percentage rate, which includes the interest rate plus any charges. Look for the lowest APR you can find – the most user-friendly personal loans have rates below 36%.

Understand the fees. Some lenders charge an origination fee, which is typically 1% to 10% of the loan amount, or late fees. Do not agree to borrow money until the lender discloses all the charges.

Check the monthly payments. You can calculate your monthly payments depending on the duration you choose. The longer the term of your loan, the more interest you will pay. Look for a repayment term that is short enough to avoid paying too much interest, but long enough that payments are manageable.

Pre-qualified. The easy way to find out if you qualify for a installment loan for bad credit is to pre-qualify. During this process, you will complete a short application with information about your income and the loan you want. The lender will make a moderate credit withdrawal, but your credit score will not be affected. You will then see what rates, conditions and loan amounts you may be entitled to.

Installment loans for bad credit vs payday loans

The defining characteristic of installment loans – that they are paid in installments – generally does not apply to payday loans. It also makes them safer than payday loans because borrowers can better handle small payments over time than a lump sum paid off all at once. Here are some differences between installment loans and payday loans.

Personal installment loans

Reimbursed over months or years.

Paid back in full within a week or two, usually on your next payday.

36% APR or less, ideally.

APR can be as high as 400%.

Usually reimbursed online, by phone or by check.

Lenders withdraw the money from your bank account, using either a check you wrote in advance or your account information.

Usually require a credit check to assess your ability to repay the loan.

Does not require a credit check.

Report payments on time to the credit bureaus to help you build your credit.

Don’t report payments on time to the credit bureaus to help build your credit.

High interest installment loans

While you would ideally find an installment loan with a rate below 36%, some lenders offer installment loans with APRs above 36% which are more affordable than payday loans.

Lenders offering high interest installment loans may not check your credit, which means they are taking more risk. For you, that means a higher APR, sometimes up to 150% or 200%.

OppLoans, for example, do not check your credit through the three major credit bureaus, but rather review information from another credit reporting service and your bank account to decide whether to lend you money. Its APRs are higher than those of other lenders who rely on traditional credit information.

Although these loans can be repaid in installments, they remain unaffordable for most borrowers. Think of them as a last resort when your main alternative is a payday loan.

How Installment Loans Affect Your Credit

Loans can help or hurt your credit, depending on how you use them. Since many lenders report to the three major credit bureaus, an installment loan gives you the opportunity to improve your credit and demonstrate financial responsibility by making payments on time.

However, if you miss a payment or don’t repay the loan, your credit score could suffer.

One way to make sure your payments are on time is to set up automatic payment. Many lenders offer a small APR rebate (usually a fraction of a percentage point) to borrowers who use automatic payment.

Alternatives to bad credit installment loans

If you have bad credit and need cash quickly, explore other low-cost options.

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