Installment loans designed for borrowers with poor credit histories make it possible for borrowers to receive the funds they require, even if they have a history of defaulting on previous loans. If your credit history, as measured by your FICO score, reflects that you have terrible or poor credit, it is highly unlikely that you will be approved for a personal loan (a score between 350 and 579). The financial institutions on this list do, however, make it possible for prospective borrowers with credit scores ranging from 580 to 600 to obtain loans.
As PaydayNow notes, the interest rates that you are offered are determined by both your credit score and the qualifications that you satisfy. This indicates that if you have a low credit score, you shouldn’t anticipate getting the lowest and best prices because you won’t qualify for them. Your priority should be to locate a financial institution that can provide you with a loan for which you are eligible rather than focus on acquiring the most favorable terms possible. The most reputable financial institutions are listed below.
What do Installment Loans for Bad Credit Mean?
Installment loans for persons with bad credit are loans that can be secured or unsecured and are intended specifically for people who have low credit scores. These loans can range from a few hundred dollars to a few thousand dollars in some cases. The loans are available to prospective borrowers who do not necessarily need to have an established credit history in order to qualify for them. Because there are fewer people who are qualified to apply for these installment loans, the interest rates are typically higher, the loan amounts are typically lower, and the repayment terms are typically shorter.
As is the case with all installment loans, the disbursement of funds occurs in a single, lump-sum payment, and interest is paid on the principal balance beginning with the very first month. Borrowers are obligated to maintain consistent monthly payments until the loan is paid in full, regardless of the length of the loan term that is now in place. The most common types of installment loans are those for the purchase of a vehicle, a home, or a piece of real estate.
Some loan providers have less severe requirements on applicants and focus specifically on providing loans to persons who have poor credit. Additional credit information, such as that offered by some credit companies, could potentially be taken into consideration by lending institutions. The minimum credit score required to apply for a loan at certain other financial institutions may be lower, and they may also permit applicants to submit their applications with a co-signer or co-borrower. Because there is less of a risk involved for the lender when providing secured loans (also known as loans requiring collateral), the credit score requirements for these loans may be more lenient.
When a Bad Credit Installment Loan May Be Considered
Consider applying for a bad credit installment loan if your FICO score is between 580 and 600. These loans are designed for borrowers with really poor credit. In a similar vein, it is possible to obtain a bad credit installment loan even if you do not have a credit history or if your credit history is spotty.
In order to be qualified for and successfully repay a loan, you need to demonstrate that you have the financial means to make the necessary monthly payments, which should include interest as well as any other fees that may be relevant. Utilize the personal loan calculator provided by Forbes Advisor in order to determine the number of monthly payments and determine if taking out an installment loan is a prudent move.
How Installment Loans for Bad Credit Change Your Credit Score
In most cases, creditors are required to record payments to Equifax, Experian, and TransUnion, which are the three major credit reporting agencies. As a direct result of this, making on-time and consistent payments toward your bills can assist you in raising your credit score. In point of fact, the weight of your payment history in determining your FICO score is 35%. However, your credit could suffer if you are late with payments or if you allow a loan to go into default. To assist you in this endeavor, many lenders offer an autopay option that enables you to plan payments in advance.
Installment loans can help you boost your credit score by adding variety to your credit mix, which is one of the factors that go into determining your FICO score (10%). Credit history accounts for 15% of your FICO score and can be established with the help of a loan that is paid back in installments, such as a personal installment loan. Even if the impact of these indications isn’t nearly as great as that of a customer’s payment history, they nonetheless have the potential to contribute to an increase in credit over time.