Installment loans are a popular form of financial loan that permits you to repay the loan amount to the lender in monthly payments. It will make it easier for borrowers to make purchases of big-ticket items, like homes, vehicles, etc.
This guide will tell you about installment loan for bad credit and how it works. You can also learn about some more important facts related to bad credit installment loans in this article.
Overview of installment loans
An installment loan is considered a generic term used to determine the type of other loans. Some of the loans with different names, like mortgage loans, personal loans, student loans, and auto loans, also come under the installment loan.
The best thing is that people do not worry about bad credit while taking installment loans. They can easily contact the reputed lender online and apply for an installment loan at their convenience.
These types of loans are provided with a lump sum amount, and borrowers have to repay this in small installments, according to the repayment period and schedule set by them.
How does the installment loan for bad credit work
Similar to other loans or credit, the approval of bad credit installment loans is also based on your creditworthiness. The approval of your installment loan commonly depends upon the following factors.
- Income
- Credit score
- Repayment history
- Debt to income ratio
- Credit utilization ratio
After you get the installment loan approval, you will either get the lump sum of the amount or another item you buy. Installment loans are either unsecured loans or secured loans. A secured installment loan is avail by providing your collateral, whereas an unsecure installment loan does not need to show any asset or collateral.
Pros and cons of taking an installment loan
We know that bad credit installment loans come in different sizes and shapes, but it does not indicate that installment loans are suitable for everyone. Here are the flashback on some of the benefits and drawbacks of getting an installment loan for bad credit
An installment loan for bad credit pros
- You will be able to refinance
- Fixed monthly payments, set by you according to your flexibility while availing loan
- Helps to improve your credit score or build a new, better credit score
An installment loan for bad credits cons
- May have to pay fees and interest
- Only avail the fixed amount
- You will be charged in the form of penalties if you repay the late monthly payments or miss the monthly payments.