Installment Loans for Bad Credit

An installment loan is a loan that is paid off over time with a series of payments called installments.

Almost all loans available in the modern world are installment loans of one kind or another.

A person with bad credit can qualify for an installment loan if they prove they have a steady source of income such as a job or government benefit. Some lenders will still charge such a person a higher rate of interest because they are taking a higher risk by loaning to a person with bad credit.

Terms of the Loan

Borrowers need to pay careful attention to the terms or rules of the loan when they take out an installment loan. The terms of installment loans for people with bad credit may contain provisions that increase interest or charge late fees if a payment is missed or late. Lenders are sometimes willing to bend or ignore these terms if a borrower with a good record contacts them and explains the situation.

Non-Installment Loans

There are some non-installment loans still available in today’s lending world. A non-installment loan is usually designed to be paid off in one lump sum rather than installments.

Secured loans from the pawnshop and payday loans are examples of modern non-installment loans because they are designed to paid off quickly. Some payday lenders will extend the terms of the loan if the borrower agrees to pay an additional fee or more interest.

Some Installment Loans

A classic example of an installment loan is a car loan, the borrower makes monthly payments until the car is paid off. Another example of an installment loan is a mortgage in which a borrower pays off the principal of a property they buy over time.

Most installment loans work by having the lender give the seller the full price of the property purchased. The borrower then pays the lender back over time. This allows people to increase their buying power beyond the level of their income.

Be Careful With Installment Loans

Installment loans can be a good deal for people with bad credit or low incomes because they  can increase purchasing power. They can be a bad deal when people are unable to make the installment payments.

Never take out an installment loan unless you know you have the ability to make several payments without your regular source of income. If you won’t be able to cover the cost of an installment payment without your job don’t take one out.