What is an installment loan?
A loan that is paid back on a schedule is called an installment loan. Car loans, mortgages, student loans, and personal loans are all examples of installment loans. Loans can vary in amount from hundreds to thousands of dollars. Interest rates can be either variable or fixed. Variable interest rates change over the life of the loan. Fixed interest rates remain the same for the life of the loan. Installment loan lenders require a credit check to approve an installment loan.
How to get an installment loan with bad credit
Securing an installment loan with bad credit may seem difficult but it is not impossible. There are several factors that lenders consider before approving a loan application. Your ability to pay back the loan is one of those factors. Proof of income will be required. Be aware that lenders will likely charge higher interest rates for candidates with bad credit. Lenders may also require additional fees or collateral to approve your loan. Collateral is something that you own. If you do not pay back your loan, the bank can take it. Examples of collateral are cash, jewelry, a car, or house.
Let's take a look at types of installment loans and strategies to increase the likelihood of being approved with a poor credit score. If you are able to secure a loan and pay on time, future payments will help grow your credit score.
Credit Union Installment Loans
If you have bad credit, consider applying for an installment loan with a credit union. The rates are typically more reasonable than bigger lenders. Credit unions will sometimes offer payday loan alternatives. In order to apply for a credit union installment loan, you must be a member of that credit union.
FHA mortgages may be approved for credit scores as low as 580. Research will be required to find lenders who will approve loans for customers with bad credit scores. Mortgage lenders may look at the circumstances of your bad credit score and factor them into their decision making process. Divorce, poor health, and unemployment are just a few of the factors that lenders may factor in. You find here https://www.expacting.com/en/blog/loan/the-5-best-fha-loans-of-2019 5 best FHA loans.
Hard credit inquiries
Most loan institutions will run a hard credit inquiry when you apply for an installment loan. It is important to remember that a hard inquiry may drop your credit score by a few points. Try to refrain from applying for multiple loan applications as it will have an unwelcome effect on your credit. Ask the lender processing your loan application what if they will require a hard inquiry before signing.
Find a cosigner
A cosigner is someone who signs your loan and is responsible if you default on the loan. A cosigner is typically a friend or relative.