Installment loans also known as personal loans are currently the fastest-growing type of consumer debt. With an 11.9% increase from the fourth quarter of 2017 to the fourth quarter of 2018 as shown in a 2019 survey from credit reporting agency Experian.

These loans offer consumers a way to borrow money for expenses, purchase a new car, or pay for needed home repairs and pay back that loan with a fixed interest rate and monthly payments.

This makes repayment of installment loans predictable and easier for consumers to fit into their existing budget.

What is an Installment Loan?

An installment loan is a consumer loan that allows you to repay your debt through a fixed monthly payment over the course of a fixed term. You’ll receive the funds at one time in a lump sum, and you’ll be required to repay the loan with a regular payment schedule.

A few examples of installment loans include personal loans, mortgages and auto loans. Although there is a wide range of different installment loan opportunities, the principle is the same. You’ll be able to fund a major purchase upfront and then pay off your debt in determined, fixed payments.

This differs from revolving credit like credit cards that allow you to use the borrowed funds over and over. installment loans are a one-time loan.

What’s the Difference Between Installment Loans and Pay Day Loans?

Installment loans are characterized by the equal payments that individuals pay back each month to the lender. Each “installment” and payment schedule is pre-arranged before the loan is finalized. Also, installment loans typically offer larger amounts of money than payday loans.

The benefits of getting an installment loan are:

• Obtain more money than a payday loan
• No penalties for early repayment
• Solution for long-term cash needs that individuals prefer to pay back in increments
• Payday loans are offered in small amounts and are paid back in a short-term time frame.

the benefits of a payday loan are:

• Offers a simple quick way to get extra cash
• Provides a solution for short-term cash needs in between paychecks
• Allows individuals to promptly take care of emergency expenses
• Preferable if individuals can pay back the loan right away

Can Installment Loans Help Build Your Credit?

If you pay your loan back on time each month, installment loans should help your credit in the long run. Each month, the lender will report information about the loan to the credit bureaus.

Again, If you stay current on the loan, that information will be positive, and you should see your score go up.

You’ll want to be aware that your credit score will initially have a small drop when you apply for an installment loan because of the hard pull on your credit report. Your debt level will also increase and have a negative impact on your credit score.

A few months of on-time payments should help you bounce back from these negatives, though.

Related: The Best Credit Builder Loans

How Do I Get Approved for An Installment Loan if I Have Bad Credit?

There are many lenders who are dedicated to helping individuals secure the money they need even when they have poor credit. It’s important to shop around to find the lowest interest rate possible as they can be higher for those with lower credit scores.

However, there are reasons you shouldn’t consider getting a personal loan if you have bad credit. Such as if you have an unstable income or are overwhelmed with your current debts.

Taking out another loan is probably not a good idea if you are in this situation. You might find that you are facing too high APRs to justify taking out the loan in your case. 

Guaranteed Installment Loans For Bad Credit

• Upstart specializes in students and recent graduates who are still working on building a credit history. You can apply for loans from $1,000 to $50,000 for everything from school expenses to vacations. Instead of a credit score, Upstart uses artificial intelligence to approve loan applications, giving the company an approval rate 27% higher than traditional methods.

• Opp Loans has no minimum credit score requirement, instead, they take a variety of factors into account. That includes bank data and information from alternate credit bureaus. Best of all, OppLoans reports your payment history to the three main credit bureaus to help you increase your score.

• One Main Financial offers loans between $1,500 to $20,000, and you can check your offers with no effect on your credit score. The process is slightly rigorous, but OneMain has been in business for more than 100 years, so it’s safe to say they know what they’re doing. After filling out your application, you’ll meet with a loan specialist at a local branch where you’ll verify your identity, income, expenses, and employment. From there, you’ll sign some paperwork and get access to your money!

• Avant offers personal loans ranging from $2,000 to $35,000, with interest rates ranging from 9.95% to 35.99% depending on your credit score. The lender features an easy online application process, along with a clear and transparent process and fast funding. If your application is approved, you could receive funds in as little as one business day.