Looking for viable loans with bad credit can be a harrowing experience. Lenders usually demand good credit scores, and yours may not be all that great. All of us struggle with bad credit one time or the other in our lives. And if you’re going through a rough financial patch, an installment loan may be the best choice.
What are Installment Loans anyway?
Installment loans are pretty self-explanatory. They’re loans where you get to pay back the amount through multiple scheduled payments. This payment schedule can range from 90 days or even seven years.
The limit amount may differ depending on the lender. But some lenders may offer loans as high as $40,000. But it’s usually more common to see amounts below $10,000. Most lenders will offer somewhere between $2,000 – $5,000.
Installment loans do not sound as fancy as bad credit loans (guaranteed approval), but they are much more practical.
So, How do Installment Loans Work?
Installment loans work essentially on reasonable interest rates and a convenient repayment structure.
The repayment schedule usually runs on a monthly basis. This schedule depends on the loan amount, loan terms, and APR. It gives you the hassle-free structure of paying back in reasonable amounts on time. Even the terms of the loan are comparatively more rational and flexible.
They’re not as stressful as payday loans and not as long-term as other personal loans. The duration can be between 3 months – 7 years. And the amount ranges from $1,500 up to $40,000. They’re one of the wisest options among bad credit loans. ‘Guaranteed Approval’ is a misleading phrase that some lenders use to attract borrowers. But in reality, no loan can come guaranteed without some basic terms and requirements. Installment loans cut through this type of nonsense to offer you easy-to-manage financing options.
Why should you use Installment Loans?
There are many loans that claim to have the best deals. But a lot of times, these can come with conditions and strings attached.
Some lenders advertise themselves with bad credit loans – guaranteed approval, but these aren’t accurate. Other times, lenders offer payday loans even with bad credit. But the repayment schedule can be short and stressful. Installment loans can give you a upper hand in all these cases.
Let’s look at a brief list of advantages for installment loans:
Benefits of Installment Loans
Bigger Loan Amounts
Installment loans usually allow you to borrow higher amounts compared to other short-term loans. Some lenders may even lend you $30,000 – $40,000 if you meet the requirements. Other bad credit loans do not let you borrow bigger amounts if your credit score is low. But with installment loans too, its more common to see loan amounts ranging from $1,500 to $5,000.
Convenient Repayment Plan
Most bad credit loans have a harsh repayment clause. You either have to pay back in a short time or compensate with really high-interest rates. Sometimes you have to do both! If you’re in a not-so-stellar financial condition, these terms can push you to ruin. Installment loans give you a longer repayment duration compared to payday loans.
Better Interest Rates
Installment loans aren’t exactly the same as payday loans. While payday loans are much more short-term in nature, installment loans can extend for longer durations. It allows the lender to create a reasonable interest rate that you can repay over time. Payday loans usually demand a much higher repayment amount, which leaves you worse off.
Comparatively Lower Payments
One of the best aspects of installment loans is the repayment schedule. If you get a longer repayment period, your payments can also be much lower. The repayment amount can get distributed over a longer period. This distribution reduces the burden on individual monthly payments.
What are Installment Loans used for?
Installment Loans are versatile and accessible. This means they can come in handy across multiple situations. The specific use of money will differ from person to person. But when you understand how they work, you’ll know where to use them. But their best use comes in those situations where you need quick cash but have bad credit.
You can use installment loans as an alternative to other loans that sound fishy. Let’s take an example. When was the last time you came across a ‘bad credit loan – guaranteed approval’? This kind of offer sound too good to be true, and they usually are. No legitimate lender guarantees a loan without verifying some basic requirements first. And you should not fall prey to this type of questionable offers.
Although they may use the phrase ‘bad credit loans – guaranteed approval,’ you can be sure there are conditions underneath. Installments loans are practical and financially sensible. You can use it as a better alternative to other short-term loans.
Installment Loans Vs. Payday Loans
Many borrowers may think payday loans give you better deals. But there are distinctions between the two loans that make installment loans better. Let’s look at an objective comparison between these two loan options:
- Payday loans require you to pay a lump sum amount on your very next paycheck. This feature can lend you into more debt than before. Installment loans, however, give you a convenient time frame to repay the debt in smaller bits.
- Some payday loans require you to provide collateral. Installment loans don’t require collateral because they’re usually unsecured loans.
- If you find the right lender, you can get an installment loan without a hard credit check. This keeps your credit score intact for the next loan. Payday loans can also come without hard credit checks, but a higher repayment amount can offset this benefit.
- Installment loans can allow you to borrow enough to cover considerable expenses. This can include purchases, unseen expenses, renovations, etc. Payday loans do not offer significant amounts because they’re short-term arrangements.
- Finally, you can use installment loans even to clear your payday loans. Payday loans require you to have the total sum of money within a few weeks. You can use an installment loan to clear these debts and slowly recover it through monthly payments.