Installment Loans for Bad Credit: Finding Your Options in 2023
For those with bad credit, obtaining a loan can feel like an uphill battle. But installment loans offer a lifeline, providing a lump sum of cash that can be repaid over time in fixed installments. These loans can be a valuable tool for managing debt, covering unexpected expenses, or financing major purchases. However, navigating the world of installment loans with bad credit can be tricky. This article will guide you through five of the best installment loan providers for borrowers with bad credit, their standout features, and key considerations for navigating the application process.
Key Takeaways:
- Bad credit doesn’t have to be a barrier: Several lenders specialize in working with borrowers with less-than-perfect credit scores.
- Consider your specific needs: Whether you need a personal loan, car loan, student loan, or a mortgage, there’s a lender tailored to your specific needs.
- Don’t settle for the first offer: Compare rates, fees, and terms from multiple lenders before making a decision.
- Understand the fine print: Pay attention to APRs, fees, and loan terms to ensure you’re getting the best deal.
- Build your credit: Even while using an installment loan, it’s important to build your credit score for future financial opportunities.
Navigating the Installment Loan Landscape
Best for Insufficient Credit History: Upstart Personal Loans
One of the most appealing aspects of Upstart is its willingness to consider applicants with insufficient credit history. They look beyond traditional credit scores, evaluating factors like education and work experience to determine your eligibility. This opens the door for those who are just starting out or have limited credit history and may not yet have a credit score.
Standout Features:
- Open to borrowers with fair credit (minimum 300 score): This is a significant advantage for those with lower credit scores who typically face more limited options.
- No early payoff fees: This allows you to pay off your loan early without incurring penalties, saving you on interest in the long run.
- Fast funding: Approved borrowers can receive their funds as early as the next business day if they accept the loan before 5 p.m. EST Monday through Friday.
Points to Remember:
- High late fees: Missing payments can lead to substantial penalties, emphasizing the importance of staying current with your loan.
- Origination fee: Upstart charges an origination fee of 0% to 10% of the target amount, which is automatically deducted from the loan before it’s disbursed.
- Social Security Number Required: Upstart requires applicants to have a Social Security number.
Best for Quick Funding: Avant Personal Loans
For those who need funding fast, Avant is a strong contender. They boast a rapid application process, often providing real-time decisions and funding as early as the next business day.
Standout Features:
- Lends to applicants with lower credit scores: Offers a more accessible option for those with bad credit who may struggle to qualify elsewhere.
- No early payoff fees: Again, this provides the flexibility to pay off the loan early without incurring additional charges.
- Quick funding: Funds are often available the very next day after approval.
Points to Remember:
- Origination fee: Avant charges an administration fee of up to 9.99%.
- Potentially high interest: While Avant is known for quick funding, their interest rates can reach up to 35.99% APR.
- No autopay APR discount: There’s no extra benefit for setting up autopay, which could lower the cost of your loan with other lenders.
Best for Buying a Car: MyAutoLoan
MyAutoLoan is a marketplace specifically designed to connect borrowers with auto loan lenders. This makes it a valuable resource for those with bad credit who need a car loan. MyAutoLoan allows you to compare different offers tailored to your credit profile and find the best deal for your situation.
Standout Features:
- Open to borrowers with bad credit (minimum 575 score): More accessible than many traditional dealerships, making it easier to find financing for your dream car.
- No early payoff fees: This option allows you to lower your interest by paying off the loan early.
- Prequalification available: Get a soft credit check that won’t affect your credit score to see what offers you might qualify for.
Points to Remember:
- Not available in all states: MyAutoLoan’s availability varies based on location.
- Limited customer service: While they offer an online marketplace, customer service options may be limited.
Best for Veterans Buying a Home: Navy Federal Credit Union
If you’re a veteran or active-duty military member, Navy Federal Credit Union is a standout option for home loans. Their dedicated programs offer benefits that can make homeownership more attainable, like 0% down payment options and no PMI requirements.
Standout Features:
- 0% down payment for most loans: This significantly lowers the upfront cost of purchasing a home.
- No private mortgage insurance required: This further reduces the overall cost of your mortgage.
- $1,000 rate-match guarantee: They’ll match a lower rate from a competing lender, offering reassurance and security.
Points to Remember:
- Membership limited to military members and their families: You must be a member of Navy Federal Credit Union to apply.
- No USDA or FHA loans: If you are seeking USDA or FHA loan options, this lender may not be the best fit.
- Origination fee: While an origination fee can be waived, you’ll get a slightly higher interest rate in exchange.
Jump to Navy Federal Credit Union Details
Best for Student Loans: Ascent Funding
Ascent is a lending platform focused on providing student loans to those currently enrolled in college or graduate programs. They cater specifically to students who may not have extensive credit history and offer flexible repayment options.
Standout Features:
- Considers borrowers with no credit: This is a crucial feature for young borrowers who are just building their credit history.
- High loan amounts: Offers up to $200,000 for undergraduate loans and up to $400,000 for graduate loans.
- Variable and fixed rates: Allows you to choose the rate option that best suits your financial needs and risk tolerance.
Points to Remember:
- Non-cosigned loans may have higher interest rates: While a co-signer is not required, it can make it easier to secure a lower interest rate.
- Doesn’t offer student loan refinancing: If you are looking to refinance existing student loans, Ascent may not be the best option.
- Co-signer release: Offers the option of releasing your co-signer once you meet specific financial criteria.
How to Compare Installment Loans
When comparing different installment loan offers, keep the following key factors in mind:
- Annual Percentage Rate (APR): The APR represents the total cost of your loan, incorporating the interest rate and any fees. Lower APRs translate to lower overall costs.
- Fees: Be mindful of various fees, including origination fees, application fees, late payment fees, and prepayment penalties. These can significantly impact the total cost of your loan.
- Loan Term: A longer loan term results in lower monthly payments but higher overall interest costs. Conversely, a shorter loan term will mean higher monthly payments but lower total interest costs.
- Funding Timeline: The time it takes to receive the loan funds can vary widely, so be sure to consider your time constraints when making a decision.
How to Apply for an Installment Loan
Applying for an installment loan is typically a straightforward process:
- Determine loan type and amount: Decide what type of loan you need and how much money you need to borrow.
- Prequalify and compare offers: Use prequalification tools to compare rates and terms from multiple lenders without impacting your credit score.
- Gather required documents and apply: Be prepared to provide documentation such as proof of income, employment history, and any other information the lender requests.
Frequently Asked Questions (FAQs)
What is an installment loan?
An installment loan is a loan that is repaid in fixed increments, or installments, over a set period of time.
What are the most common types of installment loans?
Common types of installment loans include mortgages, auto loans, personal loans, and student loans.
Can a person be denied for an installment loan?
Yes, you can be denied for an installment loan if you don’t meet the lender’s creditworthiness requirements. Factors like credit score, credit history, debt-to-income ratio, and employment history are all considered.
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Our Methodology
CNBC Select meticulously assesses lenders offering installment loans for individuals with bad credit. We evaluate factors like credit score requirements, loan amounts, APRs, loan terms, borrower protections, and overall value. This process ensures we recommend lenders who prioritize borrower needs and offer competitive rates and terms.
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