Often touted as the preferable bad credit alternative to short term loans, what are installment loans and how do they work?
If you’re in the market for a loan you’ll come across a range of options. However, when you have bad credit, that list of loan choices starts to become shorter.
If you need financing and your credit isn’t perfect, you still have a few loan options available to you – one is an installment loan. Find out how do installment work in this our guide.
What exactly is an installment loan?
Any loan that is paid in ongoing fixed regular installments can be considered an installment loan. While these loans are often associated with bad credit, they can technically be any kind of personal loan that is repaid in installments.
How do repayments work on an installment loan?
Repayment terms differ depending on what type of loan you apply for and the lender you apply with. Generally, the following will apply:
|Loan terms.||These vary between 6 and 60 months (5 years).|
|Payment method.||Lenders will usually deduct payments from your bank account on the day the payments are due. Some lenders will also give you the options of repaying the loan online, via a check or through an app.|
|Repayment frequency.||You will usually repay the loan according to your pay dates.|
How much will it cost you to borrow?
This will depend on the loan. When you apply for a loan and are approved, you should receive a loan contract that will outline the fees and interest rate that will apply to your loan. Here are the costs that may apply:
- Fees. You may be charged a loan origination fee, prepayment penalties and late payment fees.
- Interest. This is the rate of interest you are charged for borrowing, expressed as a percentage.
- Annual percentage rate (APR). This includes all fees and interest expressed as a yearly percentage.
Am I eligible for an installment loan?
Installment loans can be applied for if you have bad credit or are on a lower income as long as you are able to afford the repayments. Generally, lenders will look at your income, credit history, employment and checking account information to determine your eligibility for a loan. Keep in mind that installment loans are not legal in all states so your residency will also have a bearing on your application for an online installment loan.
Installment loans you can apply for
Check the websites of any providers you’re interested in to confirm they operate in your state of residence.
Here’s how you can apply for an installment loan
Applying for an installment loan is simple. Compare your options and find a loan you’re eligible for and that is right for you, then click “Go to Site” button to start your application.