Best Installment Loans: Compare Online Options
- October 11, 2018
- Posted by: Jeff Gitlen
- Category: Personal Loans
You need cash and you need it fast – what are you going to do? If you have great credit, your best bet is likely to get a low-interest personal loan.
But, let’s be honest, not everyone has great credit. The rest of us sometimes just have to borrow money the smartest way that we can.
That’s where installment loans come in. They’re different from payday loans in that, instead of repaying the loan in full on your next payday, you’re able to borrow the money for longer – anywhere from six months to five years – and repay it in installments.
While their interest rates can be high, they generally offer lower interest rates than payday loans.
Like payday loans, you can typically get them quickly even if you have bad credit or no credit. While some of them still require a credit check in order to qualify, they don’t just take your credit score into account when making credit decisions. Unlike payday loans, they also report your payments to the credit bureaus and help you rebuild your credit score.
If you’ve already maxed out your credit cards, can’t qualify for another loan, or need cash quickly, installment loans might be an option for you. However, it’s important to note that there are plenty of downsides – chief among which are the high interest rates. Whether installment loans are a good choice for you will depend on your personal situation.
Here is what you need to know about the best installment loans.
Best Online Installment Loans Comparison
Best Online Installment Loans by Category
- Best for Quick Funding: LendingClub
- Best for High Loan Amounts: Upgrade, Upstart
- Best for Flexible Repayment: Mariner Finance
- Best for No Fees: Marcus
- Best for Physical Branch Availability: Mariner Finance
Best for Quick Funding: LendingClub
Of all the installment loan companies listed on this page, we have found LendingClub to have the fastest funding time. We have found that it takes an average of 3.75 days (including both business days and non-business days) for approved borrowers to receive their loans from LendingClub from the time they apply. This can be especially important when consumers need their money fast to pay bills or when emergency expenses come up.
Best for High Loan Amounts: Upgrade, Upstart
Both Upgrade and Upstart offer installment loans up to $50,000. This is more than any of the other companies listed on this page. If you are looking for a large amount of money to help cover your expenses, Upgrade or Upstart may be the best choice for you. If you are looking to take out a large loan, just be sure to check how much it will cost you in the long run.
Best for Flexible Repayment: Mariner Finance
Mariner Finance allows borrowers to repay their installment loans in any amount of time from 1 to 5 years. This can be helpful for borrowers because it allows them to choose among a wide variety of monthly payments that fit their budget. With Mariner Finance, you can repay your loan fast (which allows you to save money in interest) or over a long period of time (which means your monthly payments will be lower).
Best for No Fees: Marcus
Marcus is one of the only installment loan lenders that doesn't charge borrowers fees. The lender's slogan is "No fees. Ever." That means you won't have to pay an origination fee - which can often but up to 6% of the loan amount with other lenders. In addition, there are no application fees, late fees, or prepayment penalties. This means even if you are approved for a higher interest rate with Marcus, you may end up paying less over the life of the loan as compared to lenders with lower rates who charge fees.
Best for Physical Branch: Mariner Finance
If you are looking for an in-person experience, then it is important to choose an installment loan lender with physical branches. Of the installment loan companies listed on this page, Mariner Finance has the most physical branches with over 450 locations in 22 states.
How to Find the Best Installment Loans
What Should You Look For?
If you want to take out the best installment loan, you need to know what to look for. First, look for a loan with a reasonable interest rate. Since installment loans vary significantly in terms of APRs, this will have a huge impact on the costs of your loan.
This influences your monthly payment and how much interest you’ll pay over the life of your loan. You can potentially save thousands of dollars depending on the term length and amount of your loan so this is especially important.
Next, look for a lender that provides you with several term length options. If you only want to borrow money for one year and a loan will only let you borrow it for four years, then that’s probably not a good match for you. The more term options that a lender has, the better you can customize the loan to your needs.
Finally, the last thing that you should look at are the fees that the lender is charging on the loan. If you can find an installment loan with no fees that is the best bet. Most reputable lenders won’t charge you prepayment fees, although many do still charge origination fees. Make sure to read the fine print on your loan before borrowing so you’re aware of all fees.
Like with any purchase, you benefit from shopping around. This is especially true with installment loans when things like the interest rates, term lengths, and fees will change significantly depending on the lender. And, since you're already on this page, you are already at a great starting point in terms of comparing the potential loans you could apply for.
Luckily, many installment loan companies have all of their information online and allow you to fill out a quick online application that pre-qualifies you for a loan without performing a hard credit check. That means that you’ll be able to get quotes from a bunch of different installment loan companies before deciding which is right for you.
How Installment Loans Vary From Lender-to-Lender
Installment loans vary significantly from one company to the next. In fact, payday loans and installment loans are two kinds of credit that have some of the widest variations in terms of interest rates. You’ll also see differences in things like term lengths, types of interest rates, and fees.
Another important variation is how the company makes their lending decisions. Some installment loan lenders don’t require a credit check whereas others look at your credit. Each company puts different amounts of weight on your credit score, so just because one company has turned you down for an installment loan doesn’t mean other companies will.
Installment Loan Application Process & Eligibility Requirements
Installment Loan Application Process
When it comes to getting an installment loan, there are a number of different ways to apply. You can apply online, by phone, or in person at a lender that provides installment loans on-site. In addition, some installment loan companies lend directly to consumers while others connect you with a third party lender or investor.
Applying for an installment loan is a relatively easy process and in order to do so, you usually just need your personal identification information, information about your income, and information about your checking account. If the installment loan company wants to check your credit score, you may also need your SSN number.
Income and credit score requirements vary widely from one company to another.
Some companies don’t consider your credit score at all in determining eligibility while others solely base decisions on it. Most companies, though, will partly consider your credit but look at other factors as well - like income.
When it comes to income, most lenders simply say that they will lend to you if they decide you make sufficient income in order to repay the loan. Some have income requirements that might require you make a certain amount of money, but many lenders don't. This is because if you are taking out a smaller loan, you won't need as much income in order to successfully repay it.
Another big factor in how lenders determine eligibility is your debt-to-income ratio. This ratio - which looks at your monthly debt payments divided by your monthly income - can give lenders an idea of how much of your income is already going towards debt. Though you might have a very high income, if the majority of it is already going towards debt payments, you have less free money left to repay your new installment loan.
Installment Loan Uses
The reasons why someone might use an installment loan vary widely based on the financial needs of the borrower.
They are used to pay for things like urgent medical bills, auto repairs, last-minute travel to see sick family members, tickets to once-in-a-lifetime concerts, or any other type of expense that is urgent or necessary. Life happens sometimes and if you don’t have an emergency fund to absorb the costs, then you often resort to things like loans or credit cards.
People who typically use installment loans might do so if they don’t have access to another type of loan with lower interest rates or a credit card. They need money quickly, but the fact that they have bad credit or that they don’t have a credit file means that they’re unlikely to qualify for another type of loan.
Borrowers also might want to take out a loan in order to build or rehabilitate their credit and cannot qualify for a credit card or loan. Since installment loans lenders consider criteria other than just your credit score when making lending decisions, that might mean that such people are more likely to qualify for this type of loan.
People who borrow installment loans might also be the same people who might turn to payday loans. However, installment loans are a step up from payday loans since they allow you to borrow more money, repay the loan over a longer period of time, and get lower interest rates.
Installment Loan Repayment
You repay your installment loan the way you would like most other loans. When you take out an installment loan, you’re on the hook for a monthly payment. This payment is generally the same throughout your repayment schedule, and part of it goes toward the interest you owe and another part goes toward the principal.
Generally, installment loan providers will either offer or insist upon autopay, where the money automatically comes out of your bank account. This gives them more certainty that you will actually repay them.
Repayment terms tend to be longer than on payday loans, which typically will give you two weeks to 90 days to repay. Installment loan lenders will give usually you anywhere from six months to five years to repay your loan. This is a lot shorter term length than you might qualify for with a personal loan, in which term lengths can be over 10 years.
The longer your term length, the less your monthly payments will be, but the more you’ll pay over the life of your loan in interest. Similarly, a shorter term length will mean that you’ll pay more toward your loan on a monthly basis, but that you’ll pay less interest overall. It is important to know how choosing a short-term or long-term repayment period will affect your monthly payment.
If you are struggling with repayment, rather than avoiding taking action, be sure to get in contact with your lender's customer service to see what options you have. They may allow you to temporarily defer payments until you get back on your feet.
How Much Do Installment Loans Cost?
It’s important to note that not all installment loans are created equal—some are much more expensive than others. And many state laws – but not all of them – place a cap on the rates for installment loans. For example, for a $2,000 closed-end installment loan, 32 states and the District of Columbia cap APRs from 17% to 36%. Meanwhile, five states have no cap, with some allowing installment loans to charge as much as several hundred percent APR.
How much you’ll pay will depend on the loan company you borrow from. However, they do tend to be cheaper than payday loans, which the Consumer Financial Protection Bureau found carried an average APR of 400%.
Some installment loans have origination fees of anywhere from 1 percent to 6 percent. Others will charge prepayment fees of as much as 5 percent. Some fees are optional like insurance for your loan that will pay your loan in situations like if you lose your job, or get sick, or become disabled. Make sure to carefully read the loan agreement so that you know all the fees that will be charged on your loan.
What Are the Risks of Using an Installment Loan?
There are risks involved in using an installment loan. Because you’re borrowing money at a higher interest rate, the very first risk to consider is how difficult it might be to pay it back. Some people take out an installment loan because they are living paycheck-to-paycheck and desperately need the money for urgent expenses. But after they’re able to cover the expense, they still are struggling to make ends meet and then they also have this new loan payment.
That being said, know that installment loans are not a long-term financial solution and should only be used to meet short-term financial needs when you know you can afford repayment.
When people get behind on their installment loan payments. This can lead to all sorts of additional penalties and fees on the loan making the payments even more expensive.
In this case, the borrower could end up struggling to ever pay the loan back. The financial institution could then take the borrower to court in order to try to get a judgment against them in order to seize assets or garnish wages. If you’re unable to pay, you could have to go through bankruptcy.
In addition, not paying your installment loan will damage your credit since your missed payments will be reported to credit bureaus. That will further damage your credit and make it more difficult to rebuild your credit score.
Author: Jeff Gitlen
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