Installment loans are a versatile option for many borrowers. They offer large loan amounts and fixed payments. This suits them for many purposes, from emergencies to refinancing and more. But if you have a credit score under 580, you may wonder if you can still qualify for an The good news is you can, and in this article, you’ll learn how to do so
How do installment loans work?
An installment loan is a lump sum of money you can borrow. You can then repay this loan in fixed monthly payments of principal and interest. The interest rate itself is also fixed. This makes installment loans easy to budget for. You can look at your monthly payment before signing the paperwork, helping you get a loan that fits within your budget.
Installment loans are used for various purposes, such as:
- Emergency funds
- Large purchases
- Unexpected medical bills
- Refinancing and consolidating
How to get an installment loan
Borrowers with credit under 580 may have to look a little harder for installment loans they qualify for, but they still have plenty of options. Here are the steps you can take to get an installment loan:
1. Know the amount you need
Start by determining how large of a loan you need. You want to get enough to meet your loan needs without taking out extra principal that increases your monthly payment and interest rate.
For example, if you’re consolidating and refinancing debt, know exactly how much existing debt you want to consolidate and refinance. That way, you can take out the exact loan amount needed.
2. Shop around for lenders and loans
Borrowers with credit scores under 580 should do some research online to find the right lender for their needs. You can do this by visiting individual lender websites. However, using a loan marketplace can be faster, since you can enter in your information once and the marketplace will pull in loan options from across the web.
Looking for secured loans at this stage can be a great choice for borrowers with lower credit. They require collateral, which offsets the lender’s risk and allows them to loosen their credit requirements.
3. Apply with a lender
Once you’ve chosen a lender, apply on their website, over the phone, or in person, depending on your preferences. The lender will likely want personal and financial information, such as:
- Date of birth
- Social Security number
- Proof of income (pay stubs, Form W2s, tax returns)
- Proof of employment (Employment verification letter)
- Proof of collateral’s value (if getting a secured loan)
4. Accept the terms and sign the paperwork
If approved, the lender will provide you with paperwork containing the loan amount, rate, and terms. If you agree with the terms, sign the paperwork and provide your bank information so the lender can transfer you the loan funds.
5. Begin repaying
Now, you start repaying the loan in fixed monthly payments. Make sure you have the money set aside each month for this payment. Many lenders offer an autopay feature. This automatically draws the payment from your linked payment method. As a result, you don’t have to worry about missing a payment. Plus, some lenders may offer a small discount for autopay.
In either case, make sure you have the funds set aside for each month’s payment. Otherwise, you could be charged late fees and suffer credit damage. If you use autopay, you may also overdraw your account and be charged overdraft fees.
The bottom line
A credit score under 580 doesn’t have to stop you from getting an installment loan. Start by knowing how large of a loan you need, then shop with multiple lenders to find good rates and terms. Apply with your chosen lender and, if approved, sign the paperwork and provide your bank information. Finally, begin repaying the loan and consider autopay so you don’t forget to pay. Follow these steps, and you’ll be well on your way to getting the installment loan you need.
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