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INSTALLMENT LOANS FOR BAD CREDIT
An installment loan is a loan with a particular number of set payments that have to be made over a certain time period. It can be auto loans, mortgages and different kinds of installment loans. Even though a credit card requires a monthly payment of minimum amount, it is not an installment loan. Here is a proper example to illustrate the phrase.
Let us consider Peter needs $1000 for an urgent repair. Peter applies for an installment loan at an interest rate of 25% where he will pay back the amount in 24 months. In this situation, Peter would get the full amount of $1,000 at once and then pay off his debt in 24 months with regular monthly payments of $53.4.
Why installment loans are better than payday loans?
Generally speaking, payday loans go on for a relatively shorter duration and have increased interest rates and are usually paid back on the borrower’s next payday in a single lump sum payment. On the contrary, payments from an installment loan are evenly spread out over the duration of the loan and can last for many months.
Installment loans can aid you to build credit if you have poor credit, bad credit or no credit history at all. Installment loans can help create a history of repayment since it requires several payments over a set duration.
Getting installment loans for a bad credit from a bank
Some of the best long term loan options are offered by banks. But installment loans for a bad credit are a difficult proposition. This is due to the fact that most bank loans depend a lot upon your FICO score which is the basis for their decision making related to money lending. And getting a quick response or an instant decision is almost completely out of the question.
Poor credit can be a deal breaker for an installment loan which is unsecured. This is because most bank loans call for a tedious credit underwriting process that is heavily influenced by your credit score. To gauge the capability of borrowers to repay unsecured personal loans lenders rely upon FICO scores. Negative entries like serious ailments can prevent you from being qualified, even for unavoidable situations. Borrowers who have not been financially responsible in the past or who are struggling financially have low FICO scores that raise doubts in the banks whether they will be able to or willing to repay an unsecured personal installment loan.
Credit unions are generally more lenient than banks for borrowers who do not have top notch credit. Credit unions usually don’t operate to produce dividends for stockholders as they are non-profit organizations. They have more lenient money lending regulations for their customers. Obtaining a bad credit installment loan from a credit union, nevertheless, may require a collateral or a co-signer.
Obtaining installment loans for bad credit from a finance company is often faster and easier than applying with a bank. Finance companies are often less demanding in their underwriting requirements than banks and usually do not require collateral. However, finance companies charge relatively higher interest rates than banks and are generally not the go-to option for spontaneous decisions.