Installment loans come with attractive interest rates and provide secured and unsecured options and flexible repayment terms tailored to the borrower's needs.
We'll explore the basics, including their benefits, different types, the application process, and the best options available.
By the end of this guide, you'll have all the information you need to apply and use one of these financial products responsibly.
Best Online Installment Loans Of 2023
Best for underserved and small businesses.
Camino Financial offers loans
to help small business owners take their projects to the next level. Our mission is to help underserved communities by offering access to business capital.
Amongst other requirements, we provide business loans for owners who generate at least $2,500 monthly.
One of our biggest benefits is that, if you don't have an SSN, you can apply with your ITIN.
- Loan amount: $5,100 to $25,000
- Term Lengths: 24 months
- Minimum Credit Score: 580
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Best for personal loans for people with low credit scores.
Upgrade is an all-purpose personal loan that allows people with poor credit access to cash. You can use them to cover personal or business expenses.
However, it's worth noting these loans feature an origination fee, which can range from 1.85% to 9.99% of the total amount.
- Loan amount: $1,000-$50,000
- Interest rates: 8.24% to 35.97%
- Term Lengths: 2 to 7 Years
- Minimum Credit Score: 560
Best for anyone with strong credit who needs cash on hand.
Lightstream is much more stringent with its requirement. For example, they have a higher minimum credit score and other qualification criteria, such as several years of credit history and evidence of an ability to save money.
In exchange for meeting these stricter requirements, however, borrowers get a slightly lower interest rate and no origination fee.
- Loan amount: $5,000-$100,000
- Interest rates: 6.99% to 23.99%
- Term Lengths: 2 to 7 years
- Minimum Credit Score: 660
Best for couples, business partners, etc., looking to combine borrowing power.
Lending Club falls between Upgrade and Lightstream regarding strict standards and favorable rates. You'll want to remember that the service charges origination fees from 3 to 6 percent.
One of the most unique and valuable aspects of Lending Club is that they allow joint applications, which can be helpful if you're looking to team up with someone to increase your borrowing limits.
- Loan amount: $1,000-$40,000
- Interest rates: 8.30% to 36%
- Term Lengths: 3 to 5 years
- Minimum Credit Score: 600
Best for qualified borrowers who can shop around for the best deal.
This well-known service offers some nice perks, like soft credit checks and a small discount for signing up with autopay.
On the downside, the requirements are relatively demanding: while the minimum credit score is 640, the average credit score of a borrower is closer to 750.
Rocket Loans also charges an origination fee of 1 to 6 percent, so you'll want to shop around and compare options.
- Loan amount: $2,000-$45,000
- Interest rates: 7.73% to 29.99%
- Term Lengths: 3 to 5 years
- Minimum Credit Score: 640
How to Choose the Right Installment Loan
- Interest Rates. The interests are the money the lender charges you to borrow. Look for a lender with competitive rates to keep your monthly payments affordable.
- Loan Terms. Loan terms refer to the time you must repay the loan. Shorter loan terms generally mean higher monthly payments, while longer ones offer lower monthly payments. Choose a loan term that fits your budget and financial goals.
- Repayment Flexibility. Consider the repayment options available, such as bi-weekly or monthly payments, and whether there are penalties for making early or late payments.
- Fees. Some lenders charge origination fees or prepayment penalties, which can increase the total cost of the loan. Be sure to compare the fees charged by different lenders to find the best option.
- Loan Amount. Consider the money you need to borrow and whether the lender offers the required loan amount.
- Credit Score. Your credit score can impact the interest rates and loan terms. Consider your credit score when comparing lenders to find the best loan for your financial situation.
What Are Installment Loans?
An installment loan is a financial product that allows you to borrow a lump sum and pay it back over time with fixed, regular payments.
Depending on the lender's requirements, there are both secured or unsecured loans.
They provide a predictable payment schedule, which can help you budget and plan your finances more effectively. They're also often available at lower interest rates than other types of loans, such as credit cards or payday loans.
Example of installment loans
Let's say you want to buy a car but don't have the money to pay for it upfront. You might take out an installment loan from a bank or other lender to finance the purchase.
The loan agreement would specify the total amount you're borrowing, the interest rate you'll pay, and the repayment period, typically several years.
You'll pay the lender each month, including the principal amount you borrowed and the accrued interest. Over time, you'll gradually pay off the loan until you've fully repaid it, including interest.
What Are Installment Loans Used For?
Installment loans are for various purposes, including:
- covering unexpected expenses
- making large purchases
- funding business ventures
Large purchases vary, but many use installment loans for purchases like a new home or vehicle.
For entrepreneurs, business and startup loans can help secure the funding needed to start or grow a business.
With installment loans, companies can receive a lump sum of money upfront and make predictable monthly payments over a set period. This can help companies to manage cash flow and invest in their growth over time.
How Do Installment Loans Work?
Installment loans allow you to borrow money, then pay it back in regular installments (such as monthly payments) until you pay off the loan.
To get an online installment loan, you must complete an application
asking for personal and financial information, including your income, employment status, and other relevant details.
After applying, your lender will review it and decide whether to approve your loan.
Once approved, you'll receive money up front, which must be repaid over time according to a pre-arranged schedule outlining when each payment is due and its amount.
This will generally vary depending on terms agreed upon during negotiations with your lender before the approval of the loan agreement.
Pros and Cons of Installment Loans
- Lower Interest Rates. These rates are lower than other types of loans, such as credit cards or payday loans. This can save borrowers money on interest charges over the life of the loan.
- Predictable Monthly Payments. With an installment loan, borrowers make fixed monthly payments, making budgeting easier and more predictable.
- Long Repayment Terms. This makes monthly payments more affordable and manageable.
- Flexibility. You can use online installment loans for various purposes, such as debt consolidation, making a large purchase, or covering unexpected expenses.
- Hard Credit Checks. Some loans require a hard credit check, temporarily lowering the borrower's credit score or leading to bad credit.
- Origination Fees. Some installment loan lenders charge an origination fee to cover the cost of processing the loan, which can increase the overall cost of the loan.
- Late Payment Fees. If a borrower is late on a payment, the lender may charge them a late payment fee, which can add to the overall cost of the loan.
- Risk of Overborrowing. With the availability of large loan amounts, there is a risk of overborrowing, leading to financial difficulties.
Debt consolidation loans are an excellent tool for people struggling to keep up with multiple installment loan payments.
Types of Installment Loans
You can use personal loans for debt consolidation, home improvements, and unexpected expenses.
With personal installment loans, you'll receive a lump sum of money upfront and make regular monthly payments over a set time.
You can use auto loans to purchase a vehicle. They are self-secured products.
With an auto loan, the vehicle serves as collateral, which can help lower the interest rate and make the loan more affordable.
Auto loans typically have a fixed term and interest rate, and borrowers make regular monthly payments until they pay it off.
You can use mortgages to purchase a home.
With a mortgage, the property serves as collateral for the loan, which can help to lower the interest rate and make the loan more affordable.
Mortgages typically have fixed terms and interest rates, and borrowers make regular monthly payments.
Business loans are exclusively for business expenses
, such as purchasing equipment or inventory, hiring employees, or expanding the business.
With a business loan
, borrowers receive a lump sum of money upfront and make regular monthly payments over a set period.
Student loans help fund education expenses
, such as tuition, books, and housing.
With a student loan, borrowers receive a lump sum of money upfront and make regular monthly payments. Depending on the lender's and your creditworthiness, you can find secured and unsecured student loans.
Installment Loan Requirements
To be eligible for an installment loan, you must meet specific requirements, which can vary depending on the lender and the type of loan.
Generally, you'll need to provide proof of income to demonstrate your ability to repay the loan, and your credit history will also be a significant factor in determining your eligibility
Lenders will typically check your credit score and history to assess your ability to repay the loan on time.
Additionally, most lenders will require that you have a steady job or a steady income source
You may also need to provide proof of residency
, such as a utility bill or lease agreement, to demonstrate that you are a resident of the state where the loan is being offered.
You also must be at least 18 years of age
to be eligible for an installment loan.
How to Get Installment Loans Online
Check your credit score
Your credit score will play a significant role in the interest rate and loan terms the lender offers, so checking your credit score before applying is essential.
You can get a free credit report from major credit reporting agencies like Equifax, Experian, and TransUnion.
There are a lot of online direct lenders for installment loans, each with requirements and terms.
Do your due diligence to find the lenders that best fit your needs and credit score.
Gather required documentation
Most lenders require proof of income, residency, and other personal information before approving your application.
Be sure to have these documents on hand before applying.
Fill out the application
Once you've found a lender that meets your needs, fill out their online application with your personal and financial information
The lender will review your application and credit score to determine whether you qualify for a loan.
Review and accept loan terms
If the lender approves your application, they will provide a loan offer outlining the interest rate, loan terms, and monthly payment amounts. Review the request carefully and accept the terms if they suit you.
Receive loan funds
Once you accept the loan terms, the lender will transfer the funds to your bank account.
You can then use the funds to cover your expenses as needed.
How Installment Loans Affect Your Credit
Getting an installment loan
can positively or negatively impact your credit score, depending on how you manage the loan.
On the positive side, an installment loan can help build your credit score if you make your payments on time.
This is because making timely payments shows lenders that you are a responsible borrower who can manage debt effectively.
As you make payments on your loan, your credit score may gradually increase, which can help you qualify for better interest rates and loan terms.
However, your credit score can hurt if you miss payments or make late payments on your installment loan.
If a lender reports a late payment to the credit bureaus, this mark can stay on your credit report for up to seven years, lowering your credit score and making it more difficult to obtain credit in the future.
And if you default on your loan, this can significantly impact your credit score and make it difficult to obtain credit for years to come.
To ensure that an installment loan positively impacts your credit score, you must make all your payments on time and in full.
If you need help making payments, contact your lender as soon as possible to discuss your options.
Many lenders are willing to work with borrowers to find a solution that allows them to keep their loans in good standing.
Gain Financial Freedom with an Installment Loan
These loans are popular for those needing a lump sum to cover unexpected expenses or make a significant purchase. Plus, they can help you build credit if you make them on time and in full.
By managing your loan effectively and using it as a tool to achieve your financial goals, you can use installment loans to your advantage and secure a brighter financial future.
If you need funding to turn your dreams into reality, consider checking out Camino Financial.
Our business loans can help you get the financing you need to grow your business.
You can see if you prequalify by completing our online application.
If you complete the whole application process and we approve your loan, just accept the terms, receive funds, and keep track of payments through your personalized member portal.
Apply for a business loan today
What is the easiest loan to get approved for?
Generally, loans secured by collateral, such as a car loan or a home equity loan, may be easier to get approved for because the lender has some assurance that they can recoup their losses if you default on the loan.
On the other hand, unsecured loans, such as personal loans or credit cards, may be more challenging to get approved for because there is no collateral to secure the loan.
What is the easiest online payday loan to get?
The easiest is typically one with a very low credit score requirement, usually around 500-600.
However, it's important to note that interest rates on these loans can be pretty high, and the repayment terms tend to be much shorter than traditional loans.
How to get a loan when no one gives you one?
If you need help getting approved for a loan, there are several steps you can take to increase your chances.
These include checking and improving your credit score, shopping around for lenders, considering a co-signer, exploring alternative lenders, and improving your overall financial situation.
It's important to remember that taking on debt should be a careful decision and that it's essential only to borrow what you can afford to repay.
Where can I get an installment loan?
You can obtain installment loans from various sources, including traditional banks and credit unions, online lenders, peer-to-peer lending platforms, and payday loan stores.
Can I get an installment loan with bad credit?
It can be more challenging getting installment loans for bad credit. Some lenders specialize in working with borrowers with poor credit, while others may require a higher credit score to qualify for a loan.
Loans for bad credit require you to provide additional documentation, such as proof of income or a co-signer. It's important to shop around and compare rates and terms from multiple lenders to find the best deal.
Are there online installment loans?
Yes, many online lenders offer installment loans. Online installment loans are similar to traditional ones, but the application process is typically faster and more convenient.
Be careful with installment loans with no credit check.
Although they seem like a great way to get money fast, they often come with higher interest rates than traditional bank loan products, making them potentially expensive forms of borrowing.
Do installment loans require a credit check?
Most lenders require a credit check when you apply for an installment loan. Your credit score is an essential factor in determining your eligibility for a loan, as well as the interest rate and terms you may qualify for.
What is an online installment loan?
This type of short-term financial product allows borrowers to borrow money over an agreed-upon period, with interest, and in return, make regular payments on the loan's principal balance.
When is an installment loan a good idea?
An installment loan can be a good idea in various situations, such as when you need to make a large purchase or pay for an unexpected expense but don't have the cash to do so.
Which is better, a payday loan or an installment loan?
In general, installment loans are a better option than payday loans. This is because installment loans usually have longer repayment periods, lower interest rates, and more flexible terms.
In contrast, payday loans typically have very short repayment periods and high-interest rates, making them difficult to repay and leading to a debt cycle.
Can I have multiple installment loans?
Yes, you can have multiple installment loans. In fact, many people utilize numerous installment loans to consolidate debt, build credit, and secure additional funds for large purchases such as a home or car.
What's the difference between installment loans vs. payday loans?
While both are short-term loans, they have differences that set them apart:
- Installment loans are repaid over a longer period, usually in equal monthly payments, with lower interest rates.
- On the other hand, payday loans require full repayment on the borrower's next payday. They have higher interest rates and help to cover unexpected expenses.
What is better, a traditional or an online installment loan?
Online installment loans offer several advantages over traditional in-person loans. You can apply and manage these loans entirely online, saving time and streamlining the lending process.
Managing small installment loans online is also more convenient than a traditional one.
Borrowers can view their loan balance, make payments, and manage their accounts online, saving time and hassle.