Two of the most common types of installment loans are personal loans and mortgages. Both personal loans and mortgages offer lump sums of money that borrowers get up front and then have to repay in equal installments over time, usually monthly.
Two Types of Installment Loans
Personal loans: Personal loans are installment loans that can be used for nearly anything. They typically range from $1,000 to $100,000, with payoff periods of 12 to 84+ months, depending on the lender. Personal loan APRs are usually between 4% and 36%. The credit score requirement for a personal loan is typically between 580 and 700. You can see if you are pre-qualified without hurting your credit score using WalletHub's free pre-qualification tool.
Mortgages: Mortgage loans allow people to buy a house without having enough money to pay for it up front. The borrower can live in the house before they’ve paid the full price for it, but the financial institution that issued the loan owns the title to the home until the mortgage is fully paid off. Mortgages are secured by the home, so if the borrower doesn’t pay off the loan, they may lose the home.
Other types of installment loans include student loans, car loans and credit-builder loans. Ultimately, you need to choose an installment loan based on what you can qualify for, your financial standing and what you need the loan for.
The main types of installment loans are personal loans, mortgages, home equity loans, car loans, student loans and credit-builder loans. Each type of installment loan has different requirements, APRs, fees, payoff periods, and amounts of funding. Some are also used for specific purposes.
Personal loans are installment loans that can be used for nearly anything. They typically range from … read full answer$1,000 to $100,000, with payoff periods of 12 to 84+ months, depending on the lender. Personal loan APRs are usually between 4% and 36%.
The credit score requirement for a personal loan is usually between 585 and 700. You can see if you are pre-qualified without hurting your credit score using WalletHub's free pre-qualification tool.
Mortgages, or home loans, allow people to finance a house without having all of the money up front. The issuer of the mortgage continues to partially own the house until the borrower pays the mortgage off fully. If you can't pay the mortgage off, you risk foreclosure.
Mortgages typically last for 10 to 30 years, and the average APR is around 2% to 4%. Mortgages usually require a credit score of around 620 if they're private or 580 if they're government-insured.
Home equity loans allow people to borrow a portion of the difference between the value of their home and the amount left to pay on the mortgage. The loan is secured by the house, however, so there's a risk of foreclosure if you can't pay what you owe.
Home equity loans usually last for 5 to 30 years, have APRs of around 2% to 6%, and tend to require a credit score of at least 680.
Auto loans help you finance the purchase of a new or used car. They usually last anywhere from 24 to 72 months and have APRs of around 2% to 6%. While there isn't a minimum credit score to get an auto loan, the higher your score is, the better your terms are likely to be.
The big downside to auto loans is that since they are usually secured by the car, your vehicle could get repossessed if you can't pay back what you owe. There are also loans for other types of vehicles, such as motorcycles and boats, that function the same way.
Student loans are loans for the purpose of paying for education and related costs like housing and food. Some are federally backed, while others are private. Federal student loans tend to have interest rates around 2% to 5%, while private loans have rates around 1% to 12%.
Student loans usually last around 10 years, but some can last for up to 30 years. You can use WalletHub's student loan calculator to help you calculate how much your monthly and total payments will be.
Credit-builder loans are probably the most unique type of installment loan. They work the opposite way of a normal loan. You make monthly payments to a lender, which puts the money (minus the interest charged) in a savings account. Once you have finished your required payments, you get access to the money in the account. The purpose of a credit-builder loan is to have positive payment information reported to the credit bureaus each month and to establish or improve your credit history.
Ultimately, choosing which type of loan to get is up to you depending on what you qualify for, what your financial standing is and what you need the loan for. You can visit WalletHub's best installment loans page to see the top ranked offers.
Yes, you can get an installment loan if you have bad credit. Some lenders, like Avant and LendingPoint, offer personal loans for people with credit scores as low as 580, which is toward the top of the bad credit range (300-639).
A handful of other types of installment loans are available to people with bad credit, too. For example, … read full answercredit-builder loans and government-funded student loans are available to people with bad credit scores. You could also consider a secured installment loan or borrowing from friends and family.
The best installment loans for people with bad credit offer APRs up to 36%, loan amounts from $1,000 to $50,000, and payoff periods from 18 to 60 months. You may also be able to apply with a co-applicant for some loans.
Do not expect to get the best rates when you apply for a loan if you have bad credit. You're more likely to get approved for the lowest loan amount and the highest APR. However, if you are able to apply with a co-applicant, you may get a better APR depending on the co-applicant's credit history and income.
If you're ready to start applying for installment loans, you can use WalletHub's pre-qualification tool to see your approval odds and what rates may be available to you. Plus, it won't hurt your credit.
It is a loan that comes with a set number of planned payments. The installments are fixed or variable, depending upon the interest rates. For an instance, a mortgage loan can be categorized as an installment loan.
It benefits all the parties involved in a transaction, including the consumer, who can afford big-ticket items; seller can increase sales volume, and the creditor can charge higher interest rate against these loans. … read full answer
WalletHub Answers is a free service that helps consumers access financial information. Information on WalletHub Answers is provided “as is” and should not be considered financial, legal or investment advice. WalletHub is not a financial advisor, law firm, “lawyer referral service,” or a substitute for a financial advisor, attorney, or law firm. You may want to hire a professional before making any decision. WalletHub does not endorse any particular contributors and cannot guarantee the quality or reliability of any information posted. The helpfulness of a financial advisor's answer is not indicative of future advisor performance.
WalletHub members have a wealth of knowledge to share, and we encourage everyone to do so while respecting our content guidelines. This question was posted by WalletHub. Please keep in mind that editorial and user-generated content on this page is not reviewed or otherwise endorsed by any financial institution. In addition, it is not a financial institution’s responsibility to ensure all posts and questions are answered.
Ad Disclosure: Certain offers that appear on this site originate from paying advertisers, and this will be noted on an offer’s details page using the designation "Sponsored", where applicable. Advertising may impact how and where products appear on this site (including, for example, the order in which they appear). At WalletHub we try to present a wide array of offers, but our offers do not represent all financial services companies or products.