Are you in need of some extra cash and do you need it immediately? If so, an installment loan may be a good option to consider. The great thing about installment loans is that unlike a payday loan, the amount you borrow isn’t due all at once. This gives you the ability to set up a repayment plan with the lender to pay off your debt in monthly installments.
What is an installment loan?
An installment loan, as the name implies is any type of loan where the borrower pays off the loan in installments. Installment loans can be anything from borrowing a few hundred dollars for needed car repairs, to financing a new vehicle or even a home. Large loans that are paid off over the course of several years typically have a lower interest rate and require good credit. But fortunately for borrowers who may not have a good credit score, or any credit history at all, there are installment loans for bad credit as well. These bad credit installment loans are for smaller amounts and are intended to be short term, anywhere from six months to a year. Which is still longer than the term of a payday loan.
How it works
Because a short term, bad credit installment loan doesn’t require a credit check in the traditional sense, a person can be approved for one in as little as three minutes online. The borrower is approved to borrow an amount from a few hundred dollars up to 2,500 dollars. There’s no need to fax any documents to the lender and the loan can be deposited directly into your account quickly and easily. Even if you’ve got a bankruptcy filing on your credit report you can be approved for an installment loan. Before the money is lent, the borrower agrees to a repayment plan in which monthly payments which include interest will be paid until the loan has been repaid.
Is an installment loan right for you?
The annual percentage rate for an installment loan is quite high, between 551.2% and 998.43%. Though this APR may seem high, it’s important to keep in mind that bad credit installment loans are intended to be short term. If you borrow only the amount that you absolutely need and make all of the necessary payments on time, you can keep interest to a minimum. Furthermore, fees for bounced checks, late credit card payments, and fees for having your utilities turned back on can be even higher than the amount you’ll be in interest for an installment loan and an installment loan can help you avoid these setbacks.
Another thing to keep in mind with installment loans is that they are considered an alternate form of credit which is something that is taken into consideration when your credit score is calculated. Though taking out an installment loan won’t boost your credit score drastically, it could raise it several points and it may push you across a score threshold if you are right on the edge. While borrowers shouldn’t take out an installment loan just to raise their credit score, it is an added bonus.
Perhaps the biggest reason to consider an installment loan instead of a payday loan or cash advance is the flexibility it gives you. The debt doesn’t need to be paid at once. You can make the monthly payments or you can pay a little more each month and pay the debt off sooner. You’re locked into an interest rate when you’re approved so the APR will never go up during the course of the repayment period.
As with any short term, small loan, the high interest rates can really damage your financial situation if you aren’t able to make the payments. Before taking out an installment loan, it’s recommended that you take a close look at your finances and determine how much you can responsibly pay back before asking for a loan. If monthly payments are going to strain your bank account too much, it may lead to a debt trap in which you have to continually borrow money to pay your bills while the interest payments pile up.
Borrowing responsibly means not using an installment loan to pay for things that aren’t strictly necessary or extremely important. If an installment loan means you can get your car fixed so you can get to and from work or that you can get your utilities turned back on then it may be the right option for you, especially if you need the money immediately.