Installment loans can provide critical financial assistance for expenses when you have bad credit. With an installment loan, you borrow a lump sum of money repaid in equal monthly payments over a set period of time. They offer more predictable payments compared to other loan types.

In this comprehensive guide, we’ll cover everything you need to know about getting installment loans online with bad credit through direct lenders.

What Are Installment Loans?

Installment loans are a type of personal loan paid back in equal monthly installments over a fixed term. These loans provide access to lump-sum cash that you repay in scheduled payments to the lender along with interest.

Installment loans can be secured or unsecured. Secured loans require collateral like a house or car that the lender can seize if you default. Unsecured installment loans don’t need collateral making them more accessible.

Loan terms typically range from 3 months to 6 years. Shorter terms have higher monthly payments while longer terms have lower payments spread out over more months. Loan amounts start around $1,000 and can exceed $100,000 for some secured installment loans.

Installment loans are one of the most flexible loan types. Borrowers can use the funds for almost any purpose like:

  • Credit card or medical debt consolidation
  • Home improvements and repairs
  • Car repairs or purchases
  • Weddings, funerals, or family emergencies
  • Education expenses
  • Vacations
  • Starting or growing a small business

Monthly payments provide predictable budgets and repayment discipline. Interest rates are also fixed for the full loan term on most installment loans.

Benefits of Installment Loans for Bad Credit

Installment loans offer several advantages for borrowers with poor credit scores:

1. Access to cash with bad credit

Lenders look at factors beyond just credit scores to approve bad credit installment loans. Income, debt levels, and credit history are also considered. Approval is possible even with prior bankruptcies or foreclosures.

2. Fixed monthly payments

Installment loans have predictable, fixed monthly payments. This helps borrowers budget and financially plan for the long-term.

3. Multiple term length options

Terms typically range from 3 months to 6 years giving borrowers flexibility. Longer terms mean lower monthly payments while shorter terms cost less in interest overall.

4. Fast funding

Many online lenders fund approved loans within 24 hours. These fast cash loans can provide immediate financial relief.

5. Lower interest rates

Installment loans may offer lower interest rates compared to payday loans and credit card cash advances. Less interest paid saves money.

6. Improve credit scores

Making on-time monthly payments builds positive payment history and can improve credit over time. This helps qualify for better loan offers in the future.

7. Simple qualification

The application process is straightforward with minimal requirements. Approval decisions are quick and funding fast.

How Do Installment Loans Work?

Installment loans provide a one-time lump sum cash payment upfront that you repay in equal monthly installments. Here is the general installment loan process:

1. Apply online

Complete a short online application with your personal details and loan request amount through a direct lender’s website.

2. Get approved

The lender reviews your application checking income, debts, credit history and other details. An approval decision is made within minutes to a few hours.

3. Accept loan offer

If approved, evaluate the loan offer terms including rates, fees, and repayment schedule. eSign loan documents to proceed.

4. Loan funding

The lender deposits the approved loan amount directly into your bank account as soon as the next business day after signing the agreement.

5. Make monthly payments

Equal monthly installment payments are automatically deducted from your bank account per the loan’s repayment schedule.

6. Become debt-free

After making all required monthly payments, the loan is repaid in full with no remaining balance. You can now enjoy life debt-free!

The straightforward process makes installment loans easy to manage even with bad credit.

What Are the Requirements for an Installment Loan?

Installment loan requirements are minimal compared to mortgages or auto loans. Here are the typical eligibility standards:

  • Minimum age: At least 18 years old in most states and 19 in Nebraska and Alabama.
  • Income: Steady verifiable income with monthly earnings. Full-time, part-time, self-employment, benefits, and retirement income may qualify. Minimum required income varies by lender.
  • Bank account: An active checking account to receive the loan and make scheduled payments.
  • Residency: Permanent U.S. resident and state resident. Proof of address required.
  • Contact information: Valid phone number and email address.
  • Credit check: Installment lenders perform a soft credit check that does not affect your score. No minimum score is required but higher scores get better rates and terms.

As long as you meet these basic criteria, you can qualify for an installment loan even with bad credit or no credit history. The lender verifies your details and makes an approval decision based on your overall creditworthiness.

What Are Common Reasons for Denial?

While requirements are flexible, some situations result in higher denial likelihood:

  • Recent bankruptcy: Many lenders require at least 12 months since bankruptcy discharge before approving loans.
  • Foreclosure or short sale: Waiting a few years after a home foreclosure or short sale can improve approval odds.
  • Outstanding loan defaults: Defaulted loans that were never paid back or brought current hurt your case. Resolving them first is recommended.
  • High debt-to-income ratio: Too much existing debt compared to your income makes approval less likely until debts decrease.
  • Unable to verify income: The lender needs to confirm your stated income level through pay stubs, tax returns or bank records.
  • Unemployment: Having a job or other income source is often required for the lender to assess repayment ability.
  • No checking account: A bank account is mandatory to receive loan funds and make scheduled payments.

Meeting the basic requirements gives you the best shot for installment loan approval. Avoiding these denial factors further improves your chances.

What Credit Score is Needed?

Many lenders do not have a minimum credit score requirement. They look at your entire credit profile instead of just the score. Others may require scores as low as 550 to 600 for approval.

The higher your credit score, the better the loan offer will be. For example, excellent credit in the 700s can qualify for interest rates as low as 4% APR. But even with poor credit in the 500s, approval is possible with rates around 25% APR.

Picking an online lender that considers multiple factors beyond just your credit score increases approval odds for bad credit.

How Much Can You Borrow?

Loan amounts for installment loans typically range from $1,000 to $5,000 for the first loan. But amounts up to $35,000 or more are possible from some lenders.

The amount you qualify to borrow depends on factors like:

  • Your income level and amount of expenses
  • Existing debt levels and credit profile
  • The lender’s underwriting policies

For a larger loan amount beyond $5,000, lenders generally require strong credit scores and higher incomes. Meeting the lender’s underwriting criteria for debt-to-income ratios makes approval more likely.

Having an established relationship with the lender, such as a history of prior installment loans paid as agreed, can support approval for higher amounts.

What Are Typical Interest Rates and Terms?

Interest rates and terms on installment loans can vary significantly by lender. Generally, interest rates for applicants with good credit range from 4% to 36%. With bad credit, rates are usually between 25% and 36%.

Shorter repayment terms of 3 to 24 months have higher monthly payments. Longer terms of 24 to 60 months have lower payments but more interest paid over time.

Online lenders offer among the most competitive rates thanks to lower overhead costs compared to traditional banks and credit unions. Be sure to compare offers from multiple lenders to find the best rate for your situation.

Making consecutive on-time payments and maintaining healthy credit habits improves your chances of qualifying for lower rates on future loans.

Do Lenders Check Your Credit?

Most online installment lenders perform a soft credit check when you apply. Soft checks only view your credit report details without impacting your credit score.

Hard credit checks that deduct points from your score are rarely needed except when applying for very large or secured installment loans.

Soft checks let you easily apply with multiple lenders to compare offers and select the best loan. Doing so in a short period only counts as one inquiry on your credit report.

Hard checks should be avoided unless you are fully committed to accepting that loan since they hurt your score if applications are denied.

Can You Get Approved with No Credit Check?

Some lenders advertise “no credit check” installment loans. This is misleading since reputable lenders always check applicants’ credit.

What lenders really mean by “no credit check” is they do not have a minimum credit score requirement. Their underwriting still includes reviewing each applicant’s credit report to assess repayment risk before approving unsecured loans.

Avoid any lender claiming to offer loans without looking at your credit at all. Legitimate lenders analyze credit profiles as part of responsible lending.

So-called “no credit check” loans may come from predatory lenders trying to trap borrowers in debt cycles with ultra-high interest rates and fees.

Stick with transparent online lenders that are upfront about examining your credit report while still providing access to bad credit borrowers. This balances your need for financing with their need to limit default risk.

What Fees Are Involved?

Typical fees for an installment loan include:

  • Origination fee: 1% to 6% of the loan amount deducted from disbursement. This covers lender administrative costs to set up the loan.
  • Late payment fee: Around 5% to 10% of the monthly payment if not received by the due date. Some lenders provide grace periods.
  • Returned payment fee: $10 to $30 when scheduled monthly payments fail due to insufficient funds.
  • Prepayment penalty: Some lenders charge this fee if you repay the full loan early. Others waive penalties allowing prepayments.

Always factor any fees into the total cost comparison when choosing between loan offers. Avoid lenders charging exorbitant fees well above industry norms.

Can Lenders Seize Your Property if You Default?

Unsecured installment loans do not risk seizure of your assets if you default. These lenders have no recourse to take your property to settle unpaid debts.

They can pursue other debt collection options like suing or reporting defaults to credit bureaus. But your assets remain protected.

For secured installment loans like auto financing or home equity loans, the property like the car or house acts as collateral. Defaulting gives the lender right to repossess the collateral.

Unsecured online installment loans provide access to cash without putting your personal possessions in jeopardy in case of inability to repay.

Tips for Applying for Bad Credit Installment Loans

Follow these tips when seeking installment loans with poor credit scores:

  • Check your credit reports – Make sure all information is accurate and dispute errors to improve your score. Lenders rely on credit report data.
  • Don’t apply for multiple new credits – Too many credit checks and new accounts negatively impact your score and loan eligibility.
  • Document income and expenses – Having pay stubs, tax docs, or bank records handy proves your ability to handle payments.
  • Explain past credit problems – Provide relevant context if you went through hardship scenarios like medical issues or divorce.
  • Start with lower loan amounts – Asking for too much with bad credit often leads to denials. Once you build history with on-time payments, higher amounts become more attainable.
  • Compare lender options – Weigh factors like loan terms, rates, fees, qualifications, and reputation. Aim for the most favorable overall deal.

With careful preparation and an understanding of lenders’ criteria, you can successfully secure much-needed financing even with poor credit.

Pros and Cons of Online Installment Loans

Installment loans from online lenders have unique advantages along with potential drawbacks to consider:

Pros

  • Fast approvals and funding in as little as 24 hours
  • Accessible for borrowers with bad credit histories
  • Convenient applications without visiting a bank branch
  • Lower rates than payday loans or credit cards
  • Fixed payments help financial planning and budgeting

Cons

  • Higher interest rates than traditional bank personal loans
  • Easy access and instant funding can tempt overborrowing
  • Online-only process lacks personal touch of community banks
  • Missed payments result in fees and credit damage
  • Predatory lenders may exploit unsuspecting borrowers through hidden fees and fine print

Evaluating the tradeoffs enables an informed decision on whether installment financing aligns with your needs and repayment capabilities.

Alternatives to Bad Credit Installment Loans

Other options to gain access to funds if you do not qualify for an installment loan include:

  • Borrowing from family/friends – The lowest risk way to access cash without borrowing costs if those relationships exist.
  • 401(k) loan – Allows borrowing against your retirement balance. Low rates but limits on amounts.
  • Credit card cash advance – Fast funding but extremely high interest rates making it very expensive.
  • Payday loans – Provide instant cash before payday but fees are astronomical and create debt traps.
  • Pawn shops – They lend based on valuable property you provide as collateral rather than credit scores.
  • Secured loans – Lets you use an asset like a vehicle title as security to qualify for a loan.
  • Peer-to-peer lending – Borrow from individual investors but requires strong credit scores for competitive rates.
  • Credit builder loans – A unique option requiring upfront security deposit which is slowly refunded as on-time payments are made.

These other sources of financing have their own pros, cons, and eligibility hurdles to research before pursuing as bad credit installment loan alternatives.

Key Takeaways

  • Installment loans allow borrowing of lump sum amounts repaid with fixed monthly payments over set terms.
  • They are accessible for bad credit borrowers and provide predictable budgeting compared to other loans.
  • Lenders consider multiple factors like income, debts, history beyond just credit scores for approval.
  • Interest rates between 25% and 36% APR are typical for borrowers with poor credit profiles.
  • Loan amounts from $1,000 to $5,000 are common but higher amounts are possible with strong credentials.
  • Following responsible borrowing practices helps manage installment loans prudently and avoid delinquency pitfalls.

Frequently Asked Questions

Q: What credit score is considered bad credit?

A: Credit scores below 630 are generally considered bad credit. Lenders label scores under 580 as very poor. Many installment lenders approve borrowers with scores in the 550s or higher.

Q: How fast can you get installment loan funds?

A: Online lenders transfer approved funds as soon as the next business day. Simply signing loan documents can lead to next day deposits.

Q: Where does the lender deposit the loan money?

A: The loan proceeds get deposited directly into your linked checking account via ACH transfer once approved and paperwork completed.

Q: When do repayment payments start?

A: The first monthly installment repayment is usually due 30 days after the loan is disbursed to your bank account. Subsequent payments follow monthly thereafter.

Q: Can late payments be waived?

A: Late fees may only be waived at the lender’s discretion in rare cases with good cause. Assume the fee will apply if payment arrives past the due date. Communicate any hardship before missing payment dates.

The Bottom Line

When faced with emergency costs and expenses, installment loans can provide bad credit borrowers access to financing that may not be available through other channels. Just be sure to only borrow amounts you can realistically afford to repay based on your budget.

With prudent borrowing decisions, installment loans enable people with poor credit to gain control over their finances through transparent credit solutions.

Samuel Mitchell