Unexpected expenses are a part of life, but when they crop up for people who have bad credit, the situation is grimmer than it is for those who have good or excellent credit ratings. This type of circumstance is worse for those with poor credit because these people are unable to turn to traditional financial institutions for emergency funds. However, bad credit is no obstacle for obtaining installment loans.
Borrowers with Bad Credit Can Qualify for Installment Loans
Nerd Wallet states that installment loans are lending products that fall somewhere between a traditional personal loan issued by a bank and a payday loan. When it comes to installment loans, borrowers with poor credit still qualify. These lenders use other qualifiers to approve borrowers.
To approve a consumer for an installment loan, a lender will confirm that the person is 25 years old or older. The company will also verify that a borrower has a checking account. This type of account is needed for the fund transfer as well as for making monthly installment payments. Installment loan applicants must also earn a particular income amount every month. Lenders verify income to make sure that a borrower earns enough to repay the loan.
What are the Repayment Terms for Installment Loans?
In most cases, installment loan lenders draw up the repayment terms of a loan before they transfer the funds to a borrower’s checking account. Lenders want the repayment schedule to work with a borrower’s budget. Because of this, most lenders offer repayment terms that range from 14 to 18 months. However, borrowers should keep in mind that interest does accrue daily on a loan, and it’s based on the amount that a consumer borrows. An advantage of this type of loan is that if the borrower is able to pay off the installment loan amount early, then the lender will not charge a penalty.
Installment loan terms are comparable to the conditions that financial institutions set up for auto loans or mortgages. This is because there is an agreed upon number of prescheduled monthly payments as well as a definite end date for the loan. Those who borrow money through an installment loan have control over the amount of fees that they pay since it is based on how long it takes the borrower to pay back the funds.
What Does it Mean to Have Bad Credit?
When people have poor credit, major banks, credit-reporting agencies and other types of lending institutions consider them a high risk. Debt.org reports that these kinds of lenders have strict criteria for borrowing funds to people. To do so, they rely on a person’s credit score. They also use this information to calculate the terms of a loan. The Great Recession caused many lenders to tighten their borrowing standards. Because of this, it’s harder for people to get the funds that they need.
What are the Signs of Bad Credit?
Often, people are unaware that they have a low credit score until they need to borrow money. Several sites offer free credit reports. Some financial institutions even provide this information. However, there are a few signs that someone has a poor credit score. For instance, a person who frequently pays his or her bills late or is paying a higher interest rate for a car loan than a lender is advertising likely has a low credit score. Individuals who are often turned down for a rental lease or have trouble gaining approval for a smartphone contract may also have poor credit.
Tips for Getting a Loan while Having Poor Credit
According to BadCredit.org, those who have a steady income are more likely to be approved for a loan even if they have poor credit. Also, borrowers should stay informed about their credit histories. This will help them resolve errors quickly and avoid the nasty surprise of being denied for a loan due to credit problems. Borrowers can also turn to lending networks to obtain loans with more favorable terms. These networks let borrowers request several offers from different lenders.
Installment Loans are a Borrowing Option for Those with Bad Credit
Bad credit is not an obstacle to obtaining an installment loan. Before borrowing money, consumers should make sure that the repayment terms are feasible based on their budgets and income. Installment loans give those with poor credit access to emergency funds. To learn more about them, visit the Personal Money Store.