Some people who have bad or challenged credit (under 630 fico) may prefer a payday loan if they can’t find an installment loan that will work for them.
If you don’t have good credit, lenders who offer installment loans will request details of your debt, income, and what your monthly obligations are to prequalify you.
Payday lenders aren’t concerned about credit, they just want to know how you plan to make that payment every 1-2 weeks or every month. If you can prove you have consistent income with a checking account, you’ll get approved.
Payday loans come with higher interest rates and shorter repayment terms.
Payday lenders withdraw the funds from your bank account weekly usually via ACH withdrawal that you preauthorize.
Unlike installment loans, payday loans don’t report your payments to the credit bureaus, so it won’t help build your credit.
Lend Hunt has a huge network of lenders who want to provide payday loans and installment loans. They make loans up to $5,000, this requires no collateral but has to be secured by a paycheck, future income, dividend, or regular income. Your credit is not a factor, both of the forms of loans are cash advance loans.
If you need fast funds, try Lend You, they have fast decision times and they make loans from $100 to $2500. They are a direct payday lender. The loans are backed by your future income, this can be a paycheck, dividend, or other regular income that you receive. You can receive the funds in your account within the next business day.
An installment loan is a type of loan that they give you all the funds up front in a lump form, then you make “installment payments” for a certain amount of time, usually, it’s a fixed amount, unless it’s variable, then it could change.
I’m sure you’ve heard of the term installment loan or it may not be that familiar to you, however, you’ve unknowingly used installment loans before.
What Exactly Is An Installment Loan?
Some characteristics are: borrowing a set amount of money, so you determine upfront what your needs are, you get funded, and start using the funds, unlike revolving credit models such as credit cards or a line of credit.
Installment loans can hurt your credit if you miss payments, it’ll cause your credit score to be impacted greatly.
After you borrow the funds, you are then required to start making payments over a fixed amount of time, each payment is called an installment, hence the name.
“What does the word “term” mean when you are referring to an installment loan? Simply speaking it means the time period you are allowed to make payments on the loan, for example, 72 months would give you 5 years to repay the loan) “
What Are Some Common Examples of Installment Loans?
We don’t realize that many of us take installment loans every day like student loans, personal loans, auto loans, and mortgages.
If you have an emergency like an unexpected medical expense, your vehicle breaks down or you just want to pay down some debt and consolidate your bills, you can take a personal loan from many sources, these usually have 12 to 96-month terms with higher interest rates, but it may work for you because you don’t need to put up collateral to secure the loan.
These can usually be funded in days instead of weeks.
Loans are offered in 12 to 96-month terms, but understand that the longer-term you accept, the lower the payment, but it will increase the interest you’ll pay on the loan, also the longer term you accept will raise the rate you’ll pay per month. If you want to pay the least amount of interest, consider taking a shorter-term like 36 months even though the payment will be higher. These can usually be funded online same or next day.
Most home buyers will apply for and use a mortgage – which is just another installment loan, which you repay between 15 and 30 years with fixed or variable monthly payments. It usually takes 30-60 days to complete a mortgage. If you have equity you can apply for refinancing.
Try Credit Unions if you Have Bad Credit
If you have bad credit, you should consider going to your local credit union, usually, the rates are lower than online lenders and they offer alternatives to payday loans. One of our personal favorites is Navy Federal and PenFed.
What Interest Rate Should You Expect?
Commonly you’ll find annual percentage rates between 6% and 36% these are considered unsecured personal loans, you should compare a few different lenders to explore your options.
What are the Benefits of Installment Loans?
In many cases, installment loans have predictable payments that you can budget for and because they have a set amount of payments to complete the loan, you’ll have an achievable target to pursue. If your income is fixed this is helpful because you want to avoid having any late or missed payments to preserve your credit score.
What are some Negatives of Installment Loans?
Like all loans, they have pluses and minuses, with these type of loans you need to properly shop for the right loan for your needs, once you agree to the loan, you can’t go back and request more. With credit cards and credit lines, they’ll increase your available credit with a click of a button or a phone call request.
Another drawback is the lender will qualify the borrower based on their credit profile largely, and if your scores aren’t solid with established credit you could be denied or offered less than what you request.
If this is the case, you can work on your credit to secure the loan you need.
Beyond interest rate concerns, you’ll also pay application fees, origination fees called points usually between 1% and 6% of the loan amount, and credit check fees. A common clause in installment loans is a pre-payment penalty which requires a fee to be paid if you want to exit the loan early.
With Max Cash Auto Title Loans, you can borrow up to $50,000, they’ve served over 500,000 people. You can apply online or over the phone, they verify your vehicle and info information.
The loan is based on your vehicles’s equity value, and your ability to make the payments, so its not credit score driven, these loans are expensive so if you can find another alternative, you should.
It’s free to apply and you don’t pay anything upfront to receive a loan. They won’t charge a penalty fee if you choose to pay off early.
Jora Credit is a direct lender that provides Installment Loans, you can get $500 to $2,600. They make loans in most states but not all. This is a very high-interest loan and if you can get a personal loan, credit card advance, or borrow from a friend or family member, you should. But first-time borrowers can get funded, for example a $2,000 loan would require bi-weekly payments of $190.50.
Loan Mart provides personal loans or loans secured by your auto title. Just submit your vehicle info, get approved, and receive cash within the next business day. They provide instant phone approvals and you can pay off the loan anytime. You just have to prove that you can pay the loan back.
Kabbage is a well-known destination for business loans which they have various business loans, right now they are focused on helping small business owners fund their PPP SBA loans. If you need funds for a business purpose, you should consider Kabbage.
SmarterLoan.com provides an easy and convenient way for consumers to be matched with a personal loan from $500 to $10,000. This loan works perfectly if you need to consolidate debt, remodel your home, or take a vacation. There is no cost to apply and you can get funded within the next business day. All credit is accepted but you must have regular income coming in.
If you’re thinking about applying for an installment loan or payday loan make sure you understand the terms and conditions of the loan. By understanding the loans offered and how they work better prepares you when you start shopping for loans and comparing terms. Don’t agree to borrow the money until the lender reveals all of the fees.