Banking and Finance

Installment Loans for Bad Credit: Why You Need One

July 27, 2021

If you're like most people, you've probably had to borrow money at some point in your life. You may have gone to a friend or family member for help, or maybe you took out a loan from a bank or credit union. 

But what if you don't have good credit? What if no one is willing to lend you money? In that case, you may want to consider getting an installment loan. Installment loans are a great option for people with bad credit, and they can provide much-needed financial relief during tough times. 

Keep reading to learn more about installment loans and why they may be the right choice for you if you have less-than-great credit.

What Are Installment Loans for Bad Credit?

Installment loans for bad credit are personal loans that are offered to borrowers with less-than-perfect credit. These loans are typically repaid in monthly installments over a set period of time, making them a more manageable option for borrowers who may not qualify for traditional loans.

While they may come with higher interest rates than other types of loans, they can still be a helpful option for borrowers who need access to cash. The key to making installment loans for bad credit work for you is finding the right loan and rates.

When choosing an installment loan, it's important to compare offers from multiple lenders to ensure you're getting the best terms. Getting a good interest rate on your loans ultimately depends on your credit, though.

What Is Bad Credit?

Your credit score is a number that represents your creditworthiness. 

The higher your score, the more likely you are to repay your debts. A low credit score indicates that you're a high-risk borrower, which means you're less likely to repay your debts. This can make it difficult to get approved for loans, credit cards, and other forms of credit. 

There are many factors that contribute to your credit score, including your payment history, the amount of debt you have, and the length of your credit history. Normally, a credit score under 600 is a poor credit score. 

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How Bad Credit Affects You

When it comes to installment loans, bad credit affects your ability to get good interest rates.

Bad credit can be caused by things like late payments, defaults, or bankruptcies. Mostly, though, the biggest factors that affect your credit score are late or missed payments and high credit utilization rates.

However, in general, bad credit can have a major impact on your finances even if you’re not applying for an installment loan specifically, so it’s important to consider that before taking on new loans or lines of credit. 

How can it impact your financial life? If you have bad credit, it can be difficult to get approved for new loans or lines of credit. As a result, you may be forced to pay higher interest rates and fees. In addition, bad credit can also make it difficult to rent an apartment or buy a car. And if you're looking for a job, many employers now check credit reports as part of the hiring process. 

As you can see, bad credit can have far-reaching implications. The good news is that there are steps you can take to improve your credit score. By paying your bills on time and maintaining a good credit history, you can eventually start to rebuild your credit. And as your credit score goes up, so will your financial options.

When You Know An Installment Loan Is Right For You

Credit aside, when does it make sense to take out an installment loan? There are many situations in which it makes sense. 

Here are some signs that an installment loan is right for you:

  • You have a clear financial goal in mind. When you take out an installment loan, you should have a specific purpose in mind. Whether you're looking to consolidate debt or finance a large purchase, knowing how you'll use the funds can help you choose the right loan and ensure that you stay on track financially.
  • You're able to make regular, consistent payments. An installment loan requires that you make regular payments over a set period of time. When taking out a loan, be sure that you're comfortable with the payment schedule and confident that you'll be able to make all of the required payments on time.
  • You have good credit. If you have good credit, you may be eligible for a lower interest rate on an installment loan. This can help save you money over the life of the loan and make repayment easier.

If you're considering an installment loan, these are some signs that it might be right for you. If these don’t apply then it might be time to take a step back and analyze your finances.

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Pros & Cons of Installment Loans

Whether you're getting installment loans online or are looking into guaranteed installment loans for bad credit, it’s a great idea to understand what you’re getting yourself into. The online installment loan instant approval factor is quite attractive, but before you click apply, think about the following factors.

On the plus side, these loans can be a good option for those who need to borrow a large sum of money. They also tend to have lower interest rates than other types of loans, making them more affordable. 

However, there are also some drawbacks to installment loans. One is that they often require collateral, such as a car or home. This means that if you default on the loan, you could lose your property. Additionally, installment loans can have origination fees and other costs, which can add up over time. 

Eligibility & Requirements for Installment Loans for Bad Credit

There are a few requirements you'll need to meet in order to apply for an installment loan. First, you'll need to have a steady income in order to repay the loan. You'll also need to have a good credit history in order to qualify for the best interest rates. 

What are the credit score requirements for an installment loan? It ultimately depends on the type of loan you’re taking out and what the total value of the loan is. Here are the average credit scores typically needed to qualify for a decent loan:

  • Mortgage Loan: 620
  • Auto Loan: 660
  • Personal Loan: 610

Finally, you'll need to provide collateral for the loan in the form of property or assets if you’re applying for a secured loan. 

If you meet all of these requirements, you should be able to apply for an installment loan and get the funding you need.

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