Installment Loans for Bad Credit
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Having horrible credit can make you feel as though being approved for any kind of loan will be impossible. However, believe it or not, there are still several loan types that don’t require you to even mention your credit score or history. Installment loans are one example of a loan type that is perfect for anyone who has horrible credit because they offer the highest odds of approval alongside cash loans and other forms of alternative funding.
However, installment loans also carry several very distinct advantages over other alternative borrowing types. While there are always pros and cons in any financial decision, the benefits of choosing an installment loan often outweigh any potential caveats. With that said, here are seven reasons why you should try installment loans if you have bad credit:
Installment loans for bad credit are a lot like guaranteed payday loans because the lender will typically give your proof of income the most weight during their deliberation. If you can prove beyond a shadow of a doubt that you have a good-paying job or a consistent form of income that pays you a similar amount of expendable income every month, you’re almost guaranteed to be approved upon verification of that income.
In most cases, you won’t need to present a credit report or consent to a hard inquiry in order to be approved for an installment loan. This is because the maximum loan amount and monthly repayment amounts will be determined based on how much income you’re earning from all combined sources.
Even if you don’t have a job, you could still be approved if you can show that you receive some other forms of income such as disability payments, welfare, worker’s compensation, settlement payments, or any other form of ongoing income. In essence, with installment loans, the proof isn’t just “in the pudding,” proof of income is basically the entire pudding.
Of course, if you have great credit then that’s just like throwing whipped cream and a cherry on top of your application, but it isn’t necessary to satisfy the lender’s appetite for their approval prerequisites.
Some loan types come with a variable interest rate, which means that the rate you pay each month is subject to change without notice. As a result, the amount due will fluctuate and could significantly increase over time. With an installment loan, you have the assurance of knowing that the loan will be paid back in evenly distributed installments that never change.
Installment loans have fixed interest rates, which means that the total amount that you owe the lender can be calculated on the date of approval and the payments can be split into even increments at that time. Knowing exactly how much is going to be withdrawn from your checking account on the agreed-upon payment dates can be helpful for someone who has horrible credit. With an installment loan, you won’t have to leave anything extra in the account other than the flat-rate amount of your monthly repayment.
Lenders that offer installment loans for bad credit because you need cash now usually won’t report to the credit bureaus, although there are some who will offer that option through an accredited third-party reporting service if you’re trying to rebuild your credit. The good thing about not having the repayments show up on your credit report is that you won’t face quick damage to your credit score if you default on the installment loan or make a few late payments.
Your debt might be sold to a collection agency if you default, at which point that collection agency may eventually place a negative item on your credit report. However, that process can take anywhere from 1-2 years or longer, and often does not happen at all.
Legislation has been passed that presents certain kinds of alternative lenders from placing items on your credit report, so the lender themselves will usually not report to the bureaus. The fact that you have that cushion to recover in the event of default or late payments is great for people with poor credit because it means there will be a grace period before your credit becomes damaged even more than it already is.
It’s important to note that every lender has its own terms and conditions, so before you apply it’s best to ask if they’ll be reporting to the credit bureaus and if they’ll be performing a hard inquiry on your credit. It’s always best to avoid additional hard inquiries if possible, especially if your credit is already in a mess.
Installment loans for bad credit are typically offered by alternative lenders that understand the urgency of their borrowers’ financial needs. They know that people with poor credit don’t always have a lot of expendable income and may, therefore, need immediate access to the money that they’re asking to borrow.
In fact, fast funding is one of the perks that alternative lenders use to attract borrowers away from bigger lenders like banks, credit unions, private lending networks, and other financial institutions. Many of those entities will never approve anyone who has poor credit, so alternative lenders also know that they’re often the last resort for many of their borrowers.
If a lender takes a long time to fund your account and you wind up not getting the money in time to meet your urgent financial need, you could still wind up facing late payment penalties on your bills and negative consequences on your credit report as a result. In a situation like that, it would be easy to understand if the borrower was disgruntled enough to put their repayments for that lender on the back burner.
On the other hand, if the lender funds the account in a matter of minutes or hours, the money can be used to serve its intended purpose within a reasonable time frame. In which case, the borrower will be happy to repay the loan as planned without any delay. Thus, the lender has just as much incentive to fund the account quickly as the borrower does to make their repayments on time.
Installment loans can be used as a gateway to larger loans that will help to build your credit faster and provide amounts ranging from $5,000 to $50,000 or more depending on your income and credit score.
By faithfully repaying the first installment loan that you get, you could gradually qualify for larger installment loans until the lender trusts you to renew with a larger personal loan. Even though repaying that first loan might not impact your score, that’s a good thing because it’s done to protect you from further damaging your credit in case you can’t repay it.
Once you’ve built up a good relationship with the same lender, you can be approved for loans that no other lender would give you due to the personal history that you’ve established with that specific lender.
Anyone who has horrible credit knows that having financial flexibility is always a good thing because it gives you the ability to adapt your repayment obligations to your job’s pay period or to arrive around the time of the month when you usually receive your primary source of income.
With an installment loan, you can choose whether you want to repay the loan over the course of three months to five years. Each lender will have different options and plans for you to choose from, with common examples being six-month, one-year, two-year, three-year, four-year, and five-year repayment periods.
Installment loans can be considered short-term or long-term borrowing solutions if you have extensive proof of income that qualifies you for a larger loan and longer loan period.
Most online installment loan providers will provide convenient portals that you can use to fill out a form and be approved in under two minutes.
By simply disclosing how much you make per month and how much you’re trying to borrow, an automated system can calculate if you’ll be approved or not. As long as you’re truthful on your pre-approval application, the result of the pre-approval should stand when you submit the actual application.
The fact that you can know in just a couple of minutes whether it’s worth your time to actually upload your proof of income is just another perk that installment loans offer.
Another great aspect of installment loans is that some lenders will agree to report your payments to the credit bureau if you request this service. They may charge an additional fee for this or they may do it for free. However, keep in mind that signing the agreement to have payments reported to the credit reporting bureaus also means that you will be held accountable if you default or make late payments.