Getting an installment loan requires a minimum credit score of 580 from major lenders. However, if you have a weak or imperfect credit profile, you may still be able to get a loan with bad credit (below 630 FICO). Some lenders may consider other factors such as bank account transactions, employment, education, and existing debts. Credit unions and online lenders are more likely to work with borrowers with bad credit, while banks tend to demand good to excellent credit.
An installment loan can have an impact on your credit ratings, and your credit ratings can also have an impact on your installment loan. Lenders will consider your scores when deciding whether to offer you a loan, and it may also influence interest rates and the terms offered.
Installment loanscan help improve your credit score by adding a history of on-time payments to your credit report. They can also expand your credit mix, which is a factor that takes into account the types of accounts you own.
It may be easier to budget for installment loans since monthly payments are predictable. Make all monthly payments on time to make the most of the opportunity to increase the credit offered by an installment loan. Installment loans work differently than revolving credit because you borrow all the funds at once. They are popular for debt consolidation because they tend to offer lower interest rates than credit cards.
Secured loans, which require collateral, are also available and may be your best option if you have poor credit. To select top personal loan lenders, Bankrate considers factors such as credit requirements and minimum APRs. The actual balance of your installment loan is not a big factor in your credit utilization rate or in the ratio of how much you owe to the amount of available credit you use. Repayment terms for installment loans can last for months or years, depending on the terms of the loan.
Before applying, consider a joint or jointly signed installment loan or secure an unsecured loan with collateral. To get the best deal on an installment loan, it's important to look for a loan in the same way you would buy a car or a house.