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Getting an installment loan with bad credit

By David Pilley on September 23, 2011

1117134_46446970-(1).jpgGetting an installment loan with bad credit? I would say no! Well, that would be my quick personal advice, but you may be offered a loan if your credit score is in the subprime range. An installment loan is paid back over a course of a few months to a few years, and it can further harm your credit score if you can’t handle it. It is one of the easiest types of loans to get, and this also means you can easily default on an installment loan if you are not careful.

The reason it is so easy to find a loan, even if you have poor credit, is because credit score is not the only factor. If a lender is offering a secured loan, they may overlook your 580 if you have a valuable piece of property, such as a car or home equity. If an unsecured loan is being offered, lenders might look at your monthly salary and deem you worthy of a loan because you appear to have enough funds to pay it back in the future. The minimum you need for most installment loans to be a US citizen at least 18 years of age, a bank account, and a monthly salary of at least $1,000.

An installment loan is basically another term for a traditional consumer loan. The amount of the loan may be up to a few thousand dollars, and the repayment plan will be spread out over the course of a few months to a few years. They may be offered in a variety of ways, from websites to the bank or credit union with which you already do business. For those without bank accounts, you can get a loan from a nearby pawn shop. The company you work for might even offer loans. A small loan may actually be a way for you to get your credit score out of the dump and back into the good 600 and over territory…

…if you don’t default. Multiple loans may be the reason your credit score is bad in the first place, and this is why it is risky. The place where you lose money (and where the lender makes money) is the interest rate. Interest rates on secured and unsecured loans are often in the double digits. Unsecured loans are usually worse because there is nothing of value acting as default protection. The longer the length of time to pay the loan back, the more interest you are going to pay. Yes, in conclusion, installment loans may be a way to improve your credit score. If you are late with payments, however, they may also be the reason your score gets worse. Make sure you have a solid budget and a reliable source of income before deciding to take out a loan.
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