Please note: High-cost short-term credit is unsuitable for sustained borrowing over long periods and would be expensive as a means of longer-term borrowing.
Getting a loan from a bank can be a challenge if you have bad credit, but there are many loan providers who specialise in instalment loans for people who don’t have the best credit history. Most lenders who provide instalment loans focus on your ability to repay rather than your traditional credit score.
With an instalment loan, you repay your borrowed funds over a period of time, usually in six months. This is a better option for people who know they can’t make a payment by their next paycheck but still need emergency financing.
Will lenders approve me for an instalment loan if I have bad credit?
The most important factor for most loans is a good credit score, but not everyone has this. If you’re one of the people who have struggled with money issues, there are lenders who might approve you despite your credit score.
What matters most is your ability to repay. If you have a steady income and a valid bank account, a bad credit instalment loan lender will see you as less risky than a traditional bank or credit card company.
When you apply to one of these lenders, make sure you meet all the requirements listed on their page. There’s no guarantee that you’ll be approved, but making sure you are eligible before applying will increase your chances.
Different lenders have different criteria for who they give loans to so compare providers and only apply for as much money as you need. This saves you in the long run and makes you appear as less of a risk to your lender.
Instalment loans you can apply forCheck the websites of any providers you’re interested in and check that you meet the eligibility requirements specified on their website.
We compare payday/short-term loans from
How does an instalment loan work?
Most bad credit instalment loans work in the same way. You start the process by submitting your application. In most cases, you can find out if you’ve been approved within a few minutes. Following approval, you can often receive your loan within the hour, if you apply in person, or as soon as the next business day, if you apply online.
Rather than repaying the borrowed money in one lumps sum on your payday, the payments are spread out over a period of months. The exact amount depends on how much you borrowed, your state laws and your loan contract. Failure to do so may result in late charges.
If your loan goes into collection due to multiple missed payments, your credit might be negatively affected. As with all short term loans, be sure you can repay both the principal and accrued interest before signing the contract.
If you’re considering applying for an instalment loan with a direct lender or with a loan-matching service, here are some features you might be interested in:
- Varied loan amount. The maximum amount you can borrow depends on state regulations. You can borrow more with an instalment loan than with a short term loan. Your existing financial situation determines how much you can borrow, and some lenders require that you work up a tiered application system before you can borrow the maximum amount.
- Varied loan terms. Most lenders will offer personal loans of up to 60 months, although it’s possible to get longer-term loans up to 120 months from some lenders. Mortgages can also be defined as instalment loans, and these typically last between 25 and 30 years.
- Varied processing times. Some lenders take longer than others to process your application and make your funds available. If you need money quickly, opt for a lender who can get your funds to you as soon as possible.
- Varied fees and charges. Keep in mind that some lenders charge lower interest and fees compared to others.
Instalment loans: benefits and drawbacks
- Choose from multiple lenders. There are plenty of options when it comes to instalment lenders. Compare your options online and find the right one for you.
- Take time to repay the loan. You don’t have to worry about repaying your loan by your next payday as you do with short term loans. Repay your loan in instalments as per the repayment plan set out in your loan contract.
- Bad credit is OK. Lenders don’t rely solely on your credit rating when it comes to approving your application. As long as you can demonstrate an ability to repay you’re able to apply for an instalment loan.
- Get money quickly. If you apply in-store, you can get your money soon after your application is approved. With an online loan, your loan will be transferred directly to your account as soon as the next business day.
- High interest. Instalment loans typically have higher interest rates when compared to loans from a bank or conventional lender.
- More long-term budgeting is required. You’ll need to budget carefully to ensure you can repay your loan in the long term. You’ll also need to account for unexpected expenses in your budget.
- Disreputable lenders. There are many disreputable lenders operating online who prey on people with bad credit so make sure you evaluate the lender before you apply.
- Direct debit. While direct debit can be a positive if you have the money to repay a large loan in the account you provide your lender, it can prove costly if your account becomes overdrawn by your lender automatically withdrawing owed funds.
What to watch out for with instalment loans
If you have bad credit and need a loan, an instalment loan can be a good idea if you have a repayment plan in place and know where the repayments will come from.
If you think you may have trouble making your repayments or that the repayments might put a strain on your budget, you should reconsider applying. If you fail to make your repayments on time, you may have to pay additional fees and it can negatively affect your credit score.
Before you accept any loan contract, go through the terms and conditions carefully so you have a clear picture of how much you may have to pay in fees and charges.
There are still options to borrow money if you have bad credit. An instalment loan gives you the ability to repay over time. It means more budgeting, but bad credit instalment loans can be paid off over time, leaving you less likely to default than a normal payday loan.
Have more questions?
Ask an Expert