One of the most common types of personal loan is the bad credit payday loan. Provided people are employed, they may qualify, not based on credit score, for a loan of up to about $1500 US Dollars (USD), and the amount of money is repaid with interest at their next payday. Another type of loan that falls into this category is the bad credit installment loan. This has similar loan limits, but the principal difference is that money borrowed is not repaid all at once. Instead it’s paid in installments or payments.
The way many of these loans work is that people find a bad credit lender and can be approved to borrow a certain amount of money. They usually need to prove employment or steady income and amount loaned is often based on amount people earn. Once the money is lent, a set term of installments, which could be three months to a year or longer, is established. Each installment payment tends to coincide paydays or other regular source of income; theoretically, people might make payments once every two weeks if that is when they receive paychecks.
While this lending and payment structure may seem convenient, a bad credit installment loan is likely to be one of the most costly loans available. They cost more than the average payday loan due to the increased risk to the lender. The longer installments last, the more people will pay in interest. Depending on the loan and the terms, total payments might end up being close to double the money borrowed, which is a hefty price to pay on a small loan.
There are some alternatives to a bad credit installment loan that might work for some people. One of these is to find a microlender that doesn’t place huge reliance on credit rating. There are a few of these even in developed countries, and this field of making small loans appears to be growing. If credit rating is not terrible, looking for other ways to obtain personal loans is highly advised. Alternately, a search to raise cash could include asking friends or family, provided the means to swiftly repay the money exists, or might include selling items of some value.
Of course, not everyone has these options and they’ll have to look at the available bad credit installment loans and lenders. There are many of these, and it makes sense if there is time to get quotes from several lenders before contracting with a particular company. Some companies do have lower rates than others. Another way to help save some money is to choose the shortest installment period possible. Essentially, the shortest installment or a single payday loan will have lowest total costs, though interest rates can still vary with each company.
It’s suggested that folks be realistic about ability to repay a bad credit installment loan in a certain time stated. If repayment is difficult, the rest of the loan amount might be renewed as a new loan, which could cost more money. People are also given a line of credit that they don’t necessarily use at first, and the temptation to borrow more can exist.
Alternative to continued borrowing, having a bad credit installment loan that originates and is repaid quickly tends to be the least expensive method of handling this form of debt. From a credit repair standpoint, successfully repaying these loans may begin to make improvements in credit score, but such improvements will depend on timely payments. A credit score could actually worsen if people start missing installments.