What Are Installment Loans?
Installment loans allow you to borrow a lump sum of money upfront and repay it over time through scheduled payments. Unlike payday loans or other short-term options, installment loans provide larger loan amounts and longer repayment terms.
With an installment loan, the loan amount, interest rate, and repayment schedule are all established upfront. You’ll receive the full loan amount at the beginning, and repayment occurs through fixed monthly payments (installments) over a set period of time – usually between 6 months to 7 years.
Installment loans are useful for financing major expenses like:
- Debt consolidation
- Home improvements
- Medical bills
- Major purchases
- Vehicle repairs
Compared to payday loans and cash advances, installment loans give you more time to repay the balance and allow you to borrow greater amounts at lower interest rates. The application process is quick and funding can be received in as little as 1 business day when you apply online.
To qualify for an installment loan you’ll need:
- Steady income
- Valid ID
- Checking account
- For larger loans, good credit is recommended
Installment loans provide an accessible way to get funding fast for major costs when you need more affordable repayment terms.
Bad Credit and Installment Loans
Bad credit, also known as poor credit or low credit scores, refers to credit scores below 580 on the FICO scale. The lower your score, the more difficult it becomes to get approved for financing options like installment loans.
Lenders view borrowers with bad credit as riskier and less likely to repay debts. To offset that risk, lenders charge higher interest rates and often have stricter eligibility requirements.
While getting installment loans with bad credit can be challenging, it’s not impossible. There are lenders that specialize in providing installment loans specifically for borrowers with poor credit.
Online lenders and subprime lenders are more likely to work with bad credit applicants. They may offer higher loan amounts and better rates compared to traditional banks or credit unions. Here are some top online lenders to consider for installment loans with bad credit:
Installment loans for bad credit work very similarly. While interest rates are higher, you still get fixed monthly payments and predictable loan terms. For many, installment loans are a better alternative than payday loans or title loans when funds are needed urgently.
Using Chime Accounts and Bad Credit
Chime is an online financial technology company that offers fee-free banking services paired with debit cards and automatic savings features.
A major benefit of Chime is it accepts applicants regardless of credit. You can open an account even with bad credit or no credit history.
Having a Chime account can actually help those with bad credit for a few reasons:
- Provides access to banking services normally difficult to get with poor credit
- Helps establish positive payment history when used responsibly
- Can increase chances of loan approval when linked to installment loan applications
Since Chime accepts borrowers with bad credit, having an active Chime checking account signals to lenders that you have a reliable way to receive loan funds. Linking the account to your loan application also gives lenders confidence you’ll be able to manage scheduled loan payments.
For those rebuilding credit, Chime provides tools to develop better financial habits. Its features like automatic savings and fee-free overdraft can help you avoid missed payments. A Chime Credit Builder debit card also reports your timely payments to the major credit bureaus.
Top Installment Loans for Bad Credit and Chime
LendingPoint is an online lender that provides installment loans from $2,000 up to $36,500 for borrowers with credit scores as low as 585. Their loans come with fixed monthly payments over 2 to 4 years.
Interest rates start at just under 20% and can be checked without affecting your credit score. To apply, you’ll need a regular income source, government-issued ID, and an active checking account like Chime.
LendingPoint has swift processing and funds most loans within 1 business day. These loans are great for debt consolidation or major purchases given the sizable loan amounts and favorable rates for bad credit borrowers.
Upstart is another popular online lending platform accepting applicants with fair credit scores starting at 580. Their fixed-rate installment loans range from $1,000 up to $50,000 with 3 or 5 year repayment terms.
Upstart considers factors beyond your credit score, like education and employment history, to provide competitive rates starting at just 6%. There are no prepayment penalties if you pay off the loan early.
To apply, you’ll need a Chime or other checking account able to receive funds via ACH transfer. Upstart offers fast decisions and can fund approved loans by the next business day.
OneMain Financial provides secured and unsecured installment loans from $1,500 up to $20,000 for borrowers with bad credit. Installment terms range from 24 to 60 months based on the loan amount and your needs.
They determine personalized interest rates and amounts during the application process. Having a Chime bank account helps streamline funding and setting up automatic payments from your account.
OneMain Financial offers flexible terms focused on monthly affordability over the lifetime of the loan. They also allow co-applicants which can improve chances of approval and potentially lower interest rates.
Tips for Securing Installment Loans
Despite having bad credit or no credit history, you can still take steps to increase your chances of successfully getting approved for an installment loan:
Secured installment loans require you to offer collateral that the lender can seize if you default. Collateral can be a vehicle, property or another valuable asset. Providing collateral reduces the lender’s risk, meaning you can possibly qualify for lower interest rates. Just be cautious taking this route, as defaulting would mean losing your collateral.
Apply with a Co-signer
Including a creditworthy co-signer with your application accomplishes the same thing as collateral – it gives the lender an assurance they will get repaid. A co-signer with good credit agrees to become equally responsible for repaying the loan. While a co-signer improves your chances of securing better loan terms, it also puts their finances on the line if you can’t repay.
If you have limited credit history, consider applying for a smaller installment loan first, like $2,000. Small loan amounts are easier to get approved for. You can build credit with on-time payments, then apply for better rates on larger installment loans down the road.
Compare Multiple Lenders
Every lender has their own eligibility criteria, so shop around and compare offers from multiple installment loan companies. Consider those catering specifically to bad credit applicants. Prequalifying lets you compare real rate quotes without hard credit inquiries.
Check Eligibility Requirements
Know what each lender requires in terms of minimum credit score, income, and other qualifications. Many publish their eligibility criteria directly on their site. Staying informed helps avoid unnecessary application rejections that can further damage your credit.
Rebuilding Credit with Installment Loans
The great thing about installment loans is they provide an opportunity to rebuild your credit if managed carefully.
On-time installment loan payments get reported to the major credit bureaus each month. Making every payment by the due date indicates you can responsibly manage credit and will gradually start increasing your credit score.
Here are some tips to help rebuild credit effectively using installment loans:
- Autopay your monthly payments from your Chime or checking account to avoid missed payments
- Pay a few days early or on time – never late
- Keep credit card balances low compared to limits
- Limit new credit applications aside from your installment loan
- Check credit reports regularly and dispute any errors
- Consider adding a small reoccurring bill in your name, like Netflix or a cell phone
With a lengthy 3-5 year installment loan, it’s possible to improve your credit score 100 points or more if all payments are made correctly. The benefits go beyond just your credit score too. Good credit saves you money on interest rates for future loans and improves your chances of securing an apartment, utilities, car insurance and even jobs.
Installment loans provide a second chance to obtain needed financing while slowly rebuilding credit for the long-term.
Despite bad credit, Chime account holders still have sensible borrowing options like installment loans to get funds for major expenses. While interest rates are higher, installment loans supply larger and more affordable loan amounts compared to short-term products like payday loans or title loans.
With the right lender, timely payments, and responsible money management, installment loans present an opportunity to not only get necessary financing now but also establish positive credit history over time.