Take Your Knowledge of Installment loans from 0 to 100!
Want to borrow a loan from an online lender? It’s great that you’re reading this. You see, smart borrowers take time to learn all they can about various loan products.
“Knowledge is power after all!” CashSpotUSA is committed to educating all our visitors about financial products.
That’s why we wrote this exhaustive guide on online installment loans. Spend the next 10 minutes or so on this page, and you’ll learn:
- How to define installment loan.
- Types of installment loans.
- How to borrow with bad credit.
- How to compare and find the best loans.
In the bonus section, we answer commonly asked questions.
Awesome! Let’s get started.
Table of contents:
- Biweekly installments vs. Monthly installments
- Is it possible to get $100,000 to $1M with an online installment loan? (Probably not)
- Factors determining loan amounts for installment loans + Table
- Requirements to get approved for an installment loan even with bad credit
- Alert! Prepare for higher interest rates & lower loan amounts
- The 10 different ways to use installment loans
- Reasons to borrow an installment loan online
- How much can you borrow with 3-month payday installment loans?
- Who gives out these loans?
- The 5 Dangers of installment payday-type loans
- Try these 7 alternatives to payday loans with installment payments
- Five things to consider when comparing installment loans online
- Frequently Asked Questions
What is an Installment Loan?
Here is a hypothetical story that expounds on installment loans:
“Let’s say I approach a bank for a $10,000 loan to finance the purchase of a fishing boat. My income every month is $3,000. After all deductions, including housing expenses, I’m left with $500.
Since I have a fairly good credit score of about 720, the bank grants me an interest rate of 10%. And they give me 24 months to repay the loan.
The lender expects my income to remain unchanged for the next two years. They decide to make all my monthly installments equal. I’ll be paying equal installments of $461.45 for 24 months.”
Now that we have laid down the mechanics of these loans, let’s boil the story down to a concise installment loans definition:
“An installment loan is a credit product where customers repay the lender in equal & variable monthly or biweekly installments.”
We have introduced a new term, “biweekly installments.” What does the phrase mean?
Employers pay employees monthly, weekly, or biweekly. For instance, many federal jobs follow a biweekly payroll, where employees are paid for 80 hours of work.
Installment loans are typically repaid every time you receive your paycheck. So, if you get funds from your employer on a biweekly basis, the lender will want to receive repayments every two weeks.
Biweekly installments vs. Monthly installments
So, which is better? Well, biweekly payments might help you clear off a loan faster. And the shorter your loan term, the less interest you pay.
Wait, if someone is paying $1,200 monthly to the lender, will he pay off the loan faster if he makes two payments of $600 every two weeks.
See, the secret lies in the number of weeks in a year. They are roughly 52 weeks. But many people just assume that one month has 4 weeks, bringing the total number to 48 weeks in a year.
That’s not right…
If you choose biweekly payments, you get four extra weeks and two more repayments. It’s like getting one extra month to pay off your loan.
Biweekly payments also have other advantages. For instance, it breaks down your monthly payment into two smaller payments. They might be more manageable than the full monthly amount.
Is it possible to get $100,000 to $1M with an online installment loan?
You see, personal installment loans are unsecured credit products. When the lender secures a loan with the borrower’s assets, they can recoup their investment in case the customer defaults.
The reason mortgage loans offer high loan amounts is that they are secured against real property. During the foreclosure proceeding, it’s possible to sell the house at market rates and recoup the loss.
Factors determining loan amounts for installment loans + Table
The right answer is: It depends on a wide range of factors as showcased by the following table:
|Income amount||If you have more income, the thinking goes that you can handle a larger loan.|
|Stability||Lenders typically look at how financially stable you are. For instance, they might ask if you rent or own.|
|Nature of employment||You might qualify for higher loan amounts if you have a stable employment track record.|
|Debt-to-income ratio||Having a low DTI ratio means your monthly obligations are low compared to your income.|
|Non-traditional data||Some lenders go as far as assessing your social media accounts, figuring out if you pay bills on time, etc.|
|Credit scores||Customers with excellent credit scores qualify for the highest loan amounts.|
Common loan amount ranges
Most online lenders give out loans ranging from $500 to $35,000. Some companies cap their highest loan amounts at $5,000, $10,000 or $25,000.
You might find that a company is licensed to operate in several states. However, their max and minimum loan amounts will vary across state lines due to different lending regulations.
Part 2: Installment loan for bad credit
Someone asked on an internet forum; “I’m wanting to borrow a loan, but my credit score is in the 560s. Is it possible?”
A credit score that’s below the 620-mark brings a host of challenges when it comes to seeking credit. It will be nearly impossible to qualify for personal loans from banks.
Well, you can try bad credit lenders instead. They can approve your loan application provided you meet some basic loan requirements.
Requirements to get approved for an installment loan even with bad credit
> Minimum income amount: To qualify for short term installment loans with terms of up to 24 months, most lenders will want to see that you’re earning at least $1,000 after deductions.
> Active bank account: Most loan companies require borrowers to have checking accounts.
> Permanent address: You must have a permanent street address. When filling out the loan request form, it’s typical to supply details on where you live.
> Adult status: You must have attained the age of majority in your state. It is not 18 years in all states. For instance, in Alabama, you have to be 19 years old before you’re deemed old enough to handle debt.
Alert! Prepare for higher interest rates & Lower Loan amounts
We hate to be the bearers of bad news, but here is the truth: You’re going to pay a premium when borrowing loans with a low credit score (FICO 669 and below).
Are lenders just being greedy when they charge high rates on a bad credit installment loan?
Nope! It is the only way they can still make profits even if some borrowers default.
For instance: “If you bought a haul of overripe bananas, you must sell each piece at a premium to breakeven. That’s because there is a probability that most of the items will rot & become unsaleable.
Now, if you had a stock of near-ripe bananas, the probability that some will go bad is small. Even if you sold them at a fair price, you still have the chance to breakeven.”
That’s the same thinking applied on installment loans.
Typically, if you have a FICO score that falls between 620 to 669, you’ll get double-digit rates, not more than 36%.
Having a score below 619 will expose you to triple-digit APRs. For instance, some loan companies charge as much as 400% for bad credit loans. What’s more, they restrict the amount you can borrow to about $5,000.
Part 3: Types of installment loans
An installment loan is any loan repaid in installments. Turns out, there are several credit products with this repayment structure. Some of them include:
Auto & car loans
New cars are very expensive! You often have to seek financing from a bank, credit union, online lender, etc. Auto loans have terms ranging from 1 to 8 years. The longer your loan duration the lower your monthly installments are going to be. But on the downside, you may pay more interest in the long haul. Something intriguing is that dealers charge higher interest rates on used cars than brand-new vehicles.
A mortgage loan is an installment loan even if it has variable interest rates, which means that your monthly payments can go up or down as the rates are revised. Since the loan amount is large, the loan duration is up to 30 years. Unlike personal loans, they are secured against the equity in the property.
Traditional personal loans
Personal loans entail borrowing money from a lender for any individual use. The lender has no way to dictate how you use the funds like for auto loans or mortgages. Some personal loans are secured. Others don’t have personal property attached.
Short term installment loans no credit check
Since they are offered to people with poor or fair credit scores, they differ in some ways to traditional personal loans. For instance, it’s typical for banks to conduct a hard credit check when pre-approving borrowers.
With “no credit check” loans, the online lender will perform a soft credit inquiry when conducting the background check. Credit scores have a little sway on whether you’re getting approved or not. But your credit type will influence the loan’s interest rates & fees.
“Short term loans” are defined as credit products with a loan duration of 12 months or less.
Long term installment loans with no credit check
Like short term installment loans, the lender is not going to approve you by conducting a hard check. The loan duration stretches to 24 months. Some companies offer terms of up to 60 months (5 years).
Student loans qualify to be called installment loans because you repay them in monthly installments. For federal loans, the type of repayment plan you choose can have you making equal installments or graduated installments that increase with time. Student loans also come with special features such as deferments.
The 10 different ways to use installment loans
Believe it or not, the cost of the installment loan influences the way you can use it. Let’s start by looking at the best uses for low-interest loans, which have APRs of 5.89% to 35.99%.
- Debt consolidation.
- Credit building.
- Funding a new business venture.
- Making a big purchase.
- Renovating your home.
If you’re borrowing a bad credit loan, the APR might be in the triple-digit range which makes the loan very expensive.
Here is an installment loan example comparing two products with different APRs:
“A man named Jack decides to approach a bad credit lender for a $5,000 loan with a term of one year and APR of 100%. His twin-brother Joe also approaches a bank for a $5,000 loan that he hopes to repay in one year. Due to his good credit standing, he snags a favorable rate of 10%. Here is a breakdown of their total costs.”
|Loan term||1 year||1 year|
*In case you want to replicate the results above, use an online personal loan calculator.
Bad credit installment loans are simply too expensive for use on such matters as buying a new lawnmower. Here are the best uses for them:
- Medical expenses for your loved ones.
- Paying rent when you are at risk of being evicted.
- Clearing overdue utility bills to avoid disconnection.
- Fixing your car when you need it most for commuting to work.
- Funding a sudden and unexpected relocation.
It is not practical to use high-APR loans for the same uses as low-interest loans.
7 Reasons to borrow an installment loan online
Banks certainly provide good loan products.
Why should you even consider working with online lenders with no physical offices you can visit? What’s so special about applying for a loan online?
After learning about these 7 practical advantages of online loans, you’ll never go “bank.”
We are always lugging around internet-enabled devices with us: Whether it’s a smartphone, tablet, or laptop.
From your handheld device, you can launch the loan request form, fill it fast, and hit the submit button.
Did you know that you can find the best loans by applying at CashSpotUSA?
Online loan companies realize that their special advantage over banks is in the flexibility they give to customers. What’s more, they are not bogged down by restrictive lending policies. So, they give riskier loans.
With good credit scores, you might even find a lender with cheaper rates than banks.
Banks tend to set the minimum loan duration for personal loans at 12 months or 24 months. But online, you can obtain a short term installment loan that you repay in 3 months. Alternatively, you can get long term installment loans with terms of up to 60 months.
When a personal disaster comes knocking, it’s vital to find funds fast. It will take you just one business day to complete the application steps. They include applying for the loan, getting approved, submitting requested documents, and signing the loan agreement electronically.
Afterward, funds are directly deposited into your bank account. On the next business day, they are available for use.
Online lenders don’t operate like loan sharks. They abide by federal lending laws & practices. Before issuing loans in any state, they obtain required licenses.
Most have also made their sites intuitive and as secure as bank websites. So, customers will enjoy a safe & comfortable borrowing experience.
Online lenders stay ahead of the curve by equipping customers with various online tools. For instance, it is now standard to get a user portal after signing up with a lender. Others provide mobile apps where you can manage your profile, see upcoming repayments, and even initiate payments.
Part 4: Payday Installment loans — The Whole Truth
Before we talk about the hybrid that’s the payday-installment loan, here is a definition of payday loans:
“A payday loan is a short-term and small-dollar credit product. It’s special in the fact that you repay it in one lump sum payment on the day you receive your paycheck.”
When payday loans have extended terms of up to 3 months, we consider them as payday installment loans. The real disadvantage of these types of loans is their high APRs. For instance, the average APR for installment payday loans is about 400%.
The interest on a payday loan accrues daily. The more days you have the loan, the more interest you pay.
How much can you borrow with 3-month payday installment loans?
The loan amount ranges from $100 to $2500.
Who gives out these loans?
Most installment loans online are offered by tribal lenders. These companies operate from tribal land, for instance, some are based in reservations.
The 4 Dangers of installment payday-type loans
1) Killer APRs
The only time you should borrow payday installment loans online is when you have no other alternatives. We recommend applying with lenders offering lower APRs first.
2) Missing a repayment is precarious
With these loans, the interest is accruing every day even if you miss a repayment. What’s more, the lender might charge a late payment penalty when the loan is past due.
3) Money is taken out of your account automatically
Most online loan companies require borrowers to set up automatic payments. Checking accounts support automatic debits which is why most online companies prefer them.
Auto loan payments are not entirely bad! They can save you the hassle of forgetting to pay the loan on time. The danger comes when you have insufficient funds in your account.
If the lender attempts to charge your account and the transaction fails, the bank will charge you NSF fees of up to $35. It increases your costs.
4) Might have a predatory aspect
When does a loan become predatory? We tend to think it’s when the lender is acting in their best interest without considering your financial health.
One of the most predatory practices, and it’s already banned in 21 states, is the practice of “rolling over a loan.”
A rollover is when the loan company extends your loan’s due date by charging you additional fees.
Sure, it sounds harmless. But remember that a longer-term leads to more interest accumulating.
Some customers have had their loans doubling many times over. If you’re continuously trapped in short-term borrowing for most of the year, you’re in a debt trap or circle.
5) They are quite tempting
Can you relate to this scenario: “You’re browsing an e-Commerce store like Amazon. You find an item you crave, but have no money to purchase it, for instance, new shoes.”
Since payday-installment loans are so convenient and offered with few restrictions, it’s quite tempting to borrow them thinking you’ll clear them in 3 months.
“I will pay it off soon!” Said the man now trapped in a debt circle. If you’re borrowing a payday loan to buy something, it’s just better to wait.
Try these 7 alternatives to payday loans with installment payments
1) Join a credit union
Credit unions bring together people with something in common. They could be employees working for the same company, people living in a certain area, or alumni of a particular college. Some credit unions are made up of members with bad credit.
You’ll access the same products provided by banks and online lenders. Only that they are offered at better rates. For instance, you can apply for payday alternative loans from credit unions.
2) 0% APR credit cards
These cards are interest-free for a certain duration with the hope that you’ll become a paying customer. Companies use them to entice new users.
But sign up for them with care. You never want to miss any repayment. If you do, the credit card company will charge a penalty APR.
3) Peer-to-peer loans
P2P loans are offered by your average American. They are rarely products of loan companies. Borrowing from your friends can also constitute a peer-to-peer loan.
There are various platforms that have made these loans easier to execute, for instance, by allowing parties to set up automatic repayments. You can even access a p2p loan from someone you have never met.
4) Seek rental assistance or help with bills
There is no shame in seeking help. And there are many places to find the assistance you need. For instance, to get some cash to pay your rent, you can join the Housing Voucher Program. If your car broke down and you have no other means of getting around, you can try the Good News Garage.
5) Try debt counseling
Debt counseling is recommended for people already overburdened by debt. You can easily find free credit-counseling online.
6) Increase your income
It’s a short-term and long-term strategy. For instance, you can work jobs in the gig economy. By continuing with your education, the new designation you earn may lead to a promotion.
Part 5: How to find the best installment loans
With so many loan companies in the market, shopping for an online loan can feel like navigating the aisles of a supermarket comparing different household cleaners. So, what should you look out for to find the best loans?
Five things to consider when comparing installment loans online
- APRs: The loan’s APR includes the interest rate + fees. It represents the total cost of the loan for one year. If you want to save money, you should choose lenders with the lowest APRs. A loan offer may state the interest rate the lender is willing to charge. You can receive loan offers when you apply on different lender websites or right here at CashSpotUSA.
- Loan amount: How much do you need to borrow? The ideal loan amount covers your expenses with a little leeway for contingencies. Don’t be ecstatic when the lender offers you more money than you need. You just want to find the best lender for your needs.
- Origination fees: Origination fees are usually deducted from the loan principal. If a lender is offering you $10,000 but deducts 5% as the origination fee, you only receive $9,500. So, find the lender offering the lowest origination fees, but also consider the total cost of the loan. Some companies may have lower origination fees but charge higher APRs.
- Loan duration: It is the financial dream of many people to be ultimately debt-free. Ensure that you get a term that allows you to clear the loan faster at the same time making your installments affordable.
- Early repayment policy: Some companies will penalize you for choosing to clear your loan ahead of your schedule. Look for lenders that allow early repayments.
- Reviews: Read reviews to see how the lender is rated.
Frequently Asked Questions
What is loan default?
You’re considered to have defaulted if 30 days have elapsed since you missed a repayment. Other lenders wait 60 to 90 days before reporting the default to CRAs like Equifax.
Can I go to jail for failing to pay an online loan?
It’s highly unlikely that you’ll go to jail for failing to pay a civil debt. But there are consequences nonetheless. The lender will hand over or sell your loan to collection agencies.
Collectors have gruesome recovery methods. You’re not going to get beat up, but they call your workplace, friends, or family. Others come knocking on your door and ask questions.
If you wrote a bad check, some companies pursue criminal charges. It might amount to a felony or misdemeanor and may land you in jail.
Do you remember this common truism? “The arm of the law is long & far-reaching.” If you ever receive a court order, it’s in your best interest to honor it.
Will applying for monthly installment payday loans affect my credit?
No, because short-term lenders rarely report repayments to the CRAs. The credit account will not be listed in your reports, so future lenders like banks can’t know if you applied for a bad credit installment loan. Should you default, however, the collection agency will report the default to the CRAs hence affecting your scores.
What are the differences between payday and installment loans?
|Features||Payday loans||Installment loans|
|Profile of borrower||Short-term high-interest loans draw people who:
||Short & long term installment loans attract borrowers who:
|Cost of credit||
Take the Next Steps
Now, you know what is an installment loan. The next step is applying for one. You don’t have to navigate to a different website or go back to the search engine to find lenders. CashSpotUSA will easily find you an installment loan for bad credit. Just click “Apply Now!”