If you have heard of “installment loans” but you are not exactly sure what it means or how it works, this is the perfect guide to expose you to aspect of installment loans, how installment loans work, the types of installment loans, and the 10 best installment loans.
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What is an installment loan?
An installment loan is a contract or arrangement involving a loan whose payments are made periodically towards the loan. For each installment payment, the borrower pays back a portion of the principal borrowed and pays interest on the loan. The loan term may be a few months or long as 30 years.
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How does an Installment loan work?
An installment loan works so that when you take out an installment loan, you will immediately receive the full money you are borrowing or the item you are purchasing, but you pay it off not once.
You pay it off sometimes with interest in regularly scheduled payments, known as installments, for a set number of weeks, months, or years.
Types of installment loans
Installment loans can be secured or unsecured. Below are some of the types of installment loans:
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Auto Loans
Auto loans can assist you in paying for a new or used car. An auto loan is secured by the car you buy
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Mortgages
A mortgage is used to purchase a house and is secured by the house.
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Student Loans
Student loans are unsecured and assist you pay for undergraduate, graduate, and other forms of post-secondary education.
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You don’t necessarily have to start repaying a student loan immediately; instead, you can wait until you graduate and find a job.
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Personal Loans
Unlike an auto loan, mortgage, or student loan, you don’t have to use a personal loan for a particular purchase.
Personal loans can be used to pay off outstanding debt, make car or home repairs, or pay an unexpected bill.
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Buy-Now, Pay-Later Loans
A Buy-now, pay-later loans allow you to spread your payments over a few installments instead of immediately paying for your purchase.
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Depending on the retailer and purchase, the repayment arrangement can range from a few weeks to years.
10 Best installment loans
1. LightStream
LightStream is a division of Truist Bank that offers loans for any occasion, such as medical needs, pre-K-12 education, or a family need.
LightStream is one of the best installment loans for large loan amounts; You can borrow considerably from 5,000 – $100,000.
Pros
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- It operates a Fast approval and funding system.
- There are no fees
- Rate discount with autopay
Cons
- The Loan uses are limited
2. Upgrade
Upgrade personal loans range from $1,000 to $50,000 with low fixed rates that will never change.
You can utilize your loan for most things, including home improvement, debt consolidation, or a major expense. It operates fast Funding.
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3. Best Egg
Best Egg offers personal loans for many purposes like debt consolidation, credit card refinancing, family needs, or home improvements.
Loans are from $2,000 to $50,000 with a fixed APR, and there are no prepayment penalties for paying your loan off early.
4. SoFi
SoFi is a digital lender that offers student loan refinancing, private student loans, home loans, investing, and various types of insurance.
SoFi is one of the best installment loans for unemployment protection because SoFi offers unemployment protection that allows you to temporarily pause your monthly payments for up to 12 months if you lose your job.
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The loan ranges from $5,000 to $100,000 and must be repaid in two to seven years.
Pros
- SoFi offers high loan amounts up to $100,000.
- There are no fees.
- There is Pre-qualification with a soft credit check.
Cons
- Cosigners are not allowed.
- It requires a higher income.
- It may be hard to qualify.
5. Happy money
Happy money is a Payoff loan purposely for borrowers who want to pay off high-interest credit card debt.
You can use a Payoff loan to get rid of a loan with accumulating interest rates and then make fixed monthly payments to your one Payoff loan.
Payoff loan is one of the best installment loans for credit card debt consolidation because Payoff offers loans exclusively for credit card debt consolidation.
Pros
- The Borrower requirements are transparent.
- The payment dates are flexible.
- There is free FICO score updates.
Cons
- Funds cannot be used for large purchases, home improvements, or emergency expenses.
- There is an origination fee.
6. Marcus
Marcus is one of the best installment loans for good credit because Marcus doesn’t list any specific credit score requirements, but you will likely need a score of at least 660 to qualify.
Interest rates on loans from Marcus start as low as 6.99 percent, and you can borrow from $3,500 to $40,000.
If you make 12 consecutive months of loan payments in full and on time, Marcus enables you to defer payment for one month without acquiring additional fees or interest.
Pros
- There is a 0.25% discount with autopay.
- The are no fees required.
- There is an option to pay creditors directly.
Cons
- No cosigners allowed.
- It requires higher credit scores.
- Specific eligibility requirements are not listed.
7. PROSPER
Prosper was the first company to go into the peer-to-peer lending market.
It offers unsecured personal loans to borrowers through an entirely virtual process, allowing it to provide low-interest rates and quick funding times.
Pros
- It is a good online experience.
- It is accessible to many borrowers.
- There are no prepayment penalties.
8. UpStart
UpStart is an installment loan lender that provides competitive loan products to borrowers with good or even fair credit.
Upstart is the best installment loan for fair credit because it has no minimum credit score requirement.
Pros
- The system approves loans instantly.
- There are custom payment dates.
Cons
- More than a credit score is used to determine eligibility.
9. LendingClub
LendingClub is the best peer-to-peer installment loan because while other peer-to-peer lenders have lower rates or higher borrowing limits, LendingClub has a lower minimum credit score and a lower maximum origination fee.
LendingClub’s rates range from 6.34 percent to 35.89 percent on loans from $1,000 to $40,000.
Pros
- It gives loans to people with fair credit and above.
- Online prequalification.
- Optional joint applications.
Cons
- Few loan terms to choose from.
- High APRs.
- No discount for automatic payments.
10. Avant
Avant concentrates on installment loans for consumers with fair and poor credit, and Avant offers loans as low as $2,000.
Avant is the best for bad credit because Avant’s minimum FICO credit score is 580, the lowest among the lenders profiled on this page.
Pros
- It requires a low credit score.
- It requires a lower minimum credit score than many competitors.
- Pre-qualification with a soft credit check
Cons
- Interest rates up to 35.95%
- No cosigners
Can I get an installment loan if I have bad credit?
There are installment loans for bad credit out there.
A lender may consider your cash flow, income, and employment to determine your rate on a bad credit loan.
You will need to check around and compare many options. Every lender has different eligibility requirements, so inquire to see which you might be eligible for with bad credit.
Conclusion
Installment loans can help you finance major things, such as a car or home.
Like any loan, there are pros and cons to consider. If you want to take out an installment loan, check around and compare rates and terms offered by lenders before signing on for installment loans.
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