Installment Loans Online | How They Work
Installment loans aren’t complicated. In fact, you’re probably already familiar with them. Auto loans and mortgages are both types of installment loans.
Let’s take a look at this type of loan, and whether or not you’ll be able to get an installment loan instantly online.
What is an Online Installment Loan?
Basically, when you get an installment loan, you borrow a lump sum of money, then you pay it back over time in the form of monthly payments (installments).
An online installment loan is just a loan that you can get online, without the hassle of having to visit a bank or other in-person lender.
How Do Installment Loans Work?
If you need a loan, you find a financial institution that’s willing to lend you the money in the amount you need. Once you’re approved for the loan, your lender gives you the lump sum you’ve agreed upon.
Then, you pay back that amount — plus interest — in regular installments. Usually, this payback comes in the form of a monthly payment you make.
When all is said and done, you’ll pay back your loan in full plus any interest through these installments.
Loan Rules, Laws, and Regulations
Your loan’s rules, laws, and regulations may vary based on your state, but there is some overarching federal regulation. Take Regulation B, for example. This regulation protects you from discrimination by dictating that lenders send you an explanation if they reject your application for your loan. Regulation Z safeguards you against misleading lending practices by ensuring you get things like a monthly billing statement.
The two primary federal laws that apply to loans are the Equal Credit Opportunity Act and the Fair Housing Act. Both are intended to prevent unfair lending, protecting you as a borrower.
Ultimately, though, rules, laws, and regulations vary depending on where you live and the type of installment loan you want. It’s worth your while to do a little homework to figure out what laws will both protect you and govern you when you take out an installment loan, even if you get your loan instantly online.
Best examples of Installment Loans
Now, let’s peek at some of the most common types of installment loans.
A payday loan essentially gives you a way to get an advance on your paycheck. It’s a short-term loan, meaning you’ll pay it back quickly (e.g., within a couple of weeks). You can usually get a payday loan for roughly the amount of your next paycheck.
You can use your payday loan for whatever you want. It most frequently comes with a fairly high interest rate.
A payday loan is a type of unsecured loan. This means you don’t need to put up collateral and the lender won’t make you prove that you can repay the loan before giving it to you. This makes it easier and faster to get than a lot of other loan types.
This is the type of installment loan you get to buy a vehicle. You’ll probably get this loan through a bank or the auto dealership from which you purchase your car.
Auto loans usually land on the low side of the interest scale.
A mortgage is a loan product specifically designed to enable you to buy a house. And that’s a good thing because a home is probably one of the most expensive purchases you’ll make in your life.
The process of getting a mortgage is usually very involved because the lender wants to make sure you’ll be able to pay back the significant amount of money you’ll borrow from them.
Like auto loans, mortgages come with lower interest rates than other types of installment loans.
While other types of installment loans have to be used for certain things (an auto loan to buy a vehicle, a mortgage to buy a house), you can use a personal loan for whatever you want.
Personal loans can be issued in larger amounts and with longer repayment periods than payday loans.
Requirements for an Installment Loan
If you want to take out an installment loan, you’ll need to meet these requirements:
You need to be at least 18 to get a loan in the U.S.
Active Checking Account
This allows you to repay your loan.
Proof of Income
This shows how much you’ll likely earn in the future so your lender can have at least a vague idea of your ability to repay.
You’ll need to provide your address, phone number, and email address.
How to Get an Installment Loan Online
If you’re interested in getting a loan, you want the process to be as easy as possible. Fortunately, with some types of loans, you can get the loan instantly online.
Say you want a payday loan, for example. You’ll just need to do the following:
Fill Out the Loan Application Form
Some payday lenders have a simple online loan application. Fill out the form to start the process.
Once they review your application, the lender will either deny or approve it. Some lenders will approve your loan instantly online.
Get Your Money
Once approved, they’ll give you the money in the amount of the loan you requested.
Installment Loans with Bad Credit
Many of the types of installment loans we mentioned above will require a credit score of at least 630. That includes mortgages, auto loans, and personal loans. But you may be able to get other types of loans even if you have bad credit.
How to Check Your Credit Score Right Now
Some credit cards and banks will give you a free credit score report periodically. If not, you can check your credit score by requesting or purchasing a credit report from any of the three credit bureaus: Experian, Equifax, or TransUnion.
Options for Bad Credit Loans
If you find your credit score is in the low 600s or below, your loan options will be limited. But you will still be able to get a payday loan because those lenders don’t check your credit before issuing loans.
Guaranteed Installment Loans for Bad Credit
Some payday lenders will even guarantee that they’ll issue you a loan even with bad credit. Do some googling to find the right option for you.
Pros and Cons of Installment Loans
Really, installment loans have one major pro balanced by one big con. The pro is that you can get a lump sum of money — much larger than you probably have on hand — to make a purchase or cover your expenses. It gives you a way to get the money you need when you need it.
The con is that installment loans come with interest. The higher the interest rate, the more you’ll pay over the life of your loan.
Installment loans can give you the cash flow you need, but it’s important to research your options to make sure you’re getting the best one.