If you want to apply for a bad credit loan, there are numerous options available. Among the best loan choices that you can consider are online installment loans. Going by their name, installment loans need payment in equal monthly (or yearly) installments over an agreed-upon period.
These payments cover a certain percentage of the principal loan amount and interest rate. The lender determines the loan amount, interest rate and loan term once they review your application. Auto loans, mortgages and personal loans are perfect examples of the loans.
Installment loans can either be secured or unsecured. Auto loans and mortgages are the only forms of secured installment loans. In this case, the vehicle or purchased house is used as collateral for the loan. On the other hand, unsecured installment loans do not have collateral requirements.
Most online loans are an unsecured form of financing. Since these loans pose a higher risk to lenders, they tend to have a high interest.
How installment loans work
The first step to applying for an installment loan is to fill an application form. The application process can either be done online or in-store. At times, you may have to specify the purpose of the loan (This is more common in traditional financial institutions).
For online installment loans, you can use the funds for any emergency or productive purpose. You are also at liberty to discuss with the lender about the loan term, repayment schedule and interest rates. Your credit score may determine the maximum loan amount that you can qualify for, as well as the rates and terms of the loan.
Generally, borrowers have to incur additional fee charges. These include the origination fees, processing fees and some potential charges like prepayment penalty or late payment fees. You can avoid paying extra interest by making your monthly payments on time.
Who benefits from installment loans?
Online installment loans can benefit those who need fast cash. It is easy to apply for the loan online and you can also get feedback within a few minutes. These loans can also be a good option for people with poor credit scores.
However, the interest rate paid may vary depending on these scores. Some lenders do not perform a credit check, provided you show proof of consistent income.
How are repayments made?
Online installment loan lenders deduct the payments directly from your bank account. The loans are repaid in smaller payments. You will receive a notification, either by phone or email immediately the funds are deducted from the account.
Once you pay the amount in full, it is still possible to apply for another installment loan. One advantage of online installment loans is that they are offered in larger amounts compared to other short term loans like cash advances and same day payday loans. The loans also have flexible repayment terms.
The terms and conditions of the loan may vary by state. As a rule of thumb, always borrow what you are comfortable to pay back.
When will I get approved?
You will get approved for an online installment loan once your application is reviewed and you sign the loan agreement. You may get the application feedback in one business day.
Ensure that you upload all the required documents. These documents are essential in determining whether you qualify for the funds or not. The sooner you avail these documents, the faster it will take to process the loan.
Important tip to remember:
When applying for an online installment loan, always choose the shortest repayment period. As much as a longer repayment term means lower monthly payments, you will have to pay more overall. Default can lead to loan consolidation.
What are the qualification requirements?
To be eligible for an online installment loan, here are the requirements that you need to meet;
- You must be at least 18 years old
- You must have an active checking account
- You must meet the minimum income requirements, which depends on your lender
- You must be a US citizen or a permanent resident in the United States
Online installment loans are intended for borrowers who need a longer repayment term rather than paying the loan in a single lump sum. The repayment amounts are usually smaller than the single payment made on a payday loan and cash advance.
With online installment loans, you can also qualify for higher amounts depending on your creditworthiness. Paying your installments on time will improve your credit score and you can be eligible for more loan products in the future.