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Compare online installment loans
Know the benefits — and risks — associated with this type of borrowing.
What is an installment loan?
An installment loan is technically any loan that comes in one fixed amount that you repay, plus interest and fees, in regular payments. Personal loans, student loans and car loans are considered installment loans.
However, the term installment loan typically refers to a type of short-term loan — similar to a payday loan. But unlike a payday loan, installment loans allow you to borrow more over a longer period of time. You may be able to borrow up to $5,000 with six or more months to pay it off.
LEARN MORE: Read our guide to how installment loans work
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What can I use an installment loan for?
You can generally use an installment loan for any legitimate purpose, including:
- Medical expenses
- Car repairs
- Emergency home repairs
- Overdue utility bills
However, it’s best to use installment loans as a last result because of the high cost of borrowing.
What to look for when comparing lenders
Although most lenders offer similar options, these points should help guide you to the right loan.
- Loan amounts. Will you be able to take out exactly how much you need? Try to avoid unnecessarily larger loans that pile on extra debt.
- Interest rates. Be skeptical of lenders that won’t give you an interest rate upfront. Try to get an estimate of your APR — your combined interest and fees — as early as you can.
- Fees. Will you have to pay a fee to apply? What about to get your loan? What are the conditions for late payments?
- Loan terms. Your loan term will determine how long you have to repay it. It’ll also determine how much you pay in interest — a longer-term loan might seem more manageable, but it could end up being hugely expensive. Try going with the shortest loan term you can afford.
- Speed. Will you be able to get your funds by the time you need them? Fast loans can sometimes be more expensive, but low interest and fees aren’t much help if you need cash right away.
- Customer reviews. If customers have rated the lender’s service highly on BBB or Trustpilot — or have run into major issues — you’ll want to know before you borrow.
Am I eligible for an installment loan?
While every lender has its own requirements, you’ll need to meet these basic criteria to qualify:
- Regular source of income
- Active checking account
- Government-issued photo ID
- US citizen or permanent resident
- At least 18 years old
Most online installment loan providers are willing to work with borrowers with less-than-perfect credit, but you’ll likely end up with higher rates.
LEARN MORE: Compare installment loans for bad credit
Pros and cons of installment loans
Installment loans are a quick and convenient option — but are often costly.
- Fast turnaround time. Lenders are able to process your application in just a few minutes. And if approved, you could receive your funds in one or two business days.
- Bad credit OK. Provided you’re able to repay your loan, you may qualify with bad credit.
- More manageable repayments structure. Unlike payday loans, installment loans have longer terms that may not put as much stress on your budget.
- Extremely high rates. Depending on your state laws, you may face an APR of 300% or more. This can result in paying thousands of dollars in interest.
- Higher total loan cost. Although repayments are smaller than payday loans, you may end up paying more overall because of the longer loan term.
- Predatory lenders.There are some common short-term loan scams that could put you in more debt than when you started.
What are my other options?
Installment loans are an expensive option and should be used as a last resort. Consider these alternatives before you borrow.
- Pay advance apps. There are apps that let you borrow from your paycheck before your payday — and some don’t require a tip or monthly fee.
- Personal loans. You can find personal loans for people with bad credit that often offer lower rates. These may be an option even if you don’t qualify at a bank or with a big-name online lender.
- Payday alternative loans (PALs). Some federal credit unions offer short-term loans with low interest rates. However, you’ll need to join the credit union to qualify.
- Crowdfunding. If you don’t need money immediately, it might be worth it to reach out to your social network and start a crowdfunding campaign. You won’t have to pay it back, though many platforms charge a fee based on how much money you raise.
You can browse our top alternatives to short-term loans for more ways to avoid high-interest debt.
Paying off an installment loan
How you repay your installment loan largely depends on your lender. Generally, you need to make monthly, semi-monthly or weekly repayments until the loan is completely paid off.
If your lender allows you to repay your loan ahead of time without charging a prepayment penalty, you could stand to save on interest. That is, as long as your loan repayments all go toward paying off interest and the amount you borrow. It’s not uncommon for installment loan providers to charge interest-only repayments in the beginning, meaning that you can’t save on interest by paying it off early.
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Frequently asked questions
Answers to common questions about installment loans.
Can I get an installment loan if I’m not a citizen or permanent resident?
You can, though most lenders require you to at least have a green card to qualify. Check out our guide to getting a loan as a nonresident to find lenders and learn about what you need to do.
Can I use an installment loan to consolidate debt?
Technically, you can. However, since installment loans typically come with high interest rates, it might not be the fix you need.
If you’re struggling to repay several short-term loans and your credit is shot, consider signing up for credit counseling. Credit counseling agencies can work with you to find a solution to your specific situation and offer advice on how to stay out of debt.
You can find a government-approved credit counseling agency near you by visiting the Department of Justice’s website.
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