Guaranteed Installment Loans for Bad Credit Direct Lenders
Most lenders don’t offer loans to applicants with bad credit because of the high risk involved. The lenders want to minimize their risk and ensure that the borrowers don’t default on their loans; thus, they offer online loans mainly to those with a good credit score and stable monthly income. But what about those who have a bad credit score? Will they have to give up their dream of buying a house, going on a vacation, or purchasing their favorite car? Fortunately, some lenders offer only guaranteed installment loans for bad credit.
These direct lenders allow the borrowers to get instant cash from direct lenders to meet their expenses. In this post, we’ll learn more about how these online loans work and how you can benefit from them. For more tips on finding the best loans, Money-Wise is the perfect place to be. Money-Wise is a leading provider of clear and trustworthy articles on personal finance topics.
What Are Installment Loans?
An installment loan allows the borrowers to get a lump sum of money that they can repay in installments over a pre-agreed loan term. Most of these loans have fixed interest rates; the principal and interest are repaid in fixed amounts every month. With installment loans, borrowers can plan their monthly budget because they already know the number of monthly payments. These loans differ from loans with variable interest rates in which the interest rates are adjusted according to the market rates.
Some of the most common installment loans include personal, no-credit-check, auto, student, and mortgages. Depending on the rates, purposes, and features, installation loans are available in various forms. For example, mortgages are home loans with fixed interest rates, long repayment terms, and collateral. The borrower purchases the property through a mortgage, and that property is used as collateral. Once the homebuyer has completed payments for 20 to 30 years, the title is transferred to the homebuyer.
What Are Guaranteed Installment Loans for Bad Credit?
A guaranteed loan is one in which a third party guarantees the loan payments or takes responsibility for the loan. Mostly, government agencies provide guarantees for loans by purchasing debt from direct lenders. Since lenders hesitate to provide loans to people with bad credit, a guarantee from a third party makes these loans more secure. Due to this guarantee, the lender can offer loans to borrowers with bad credit. Without a guarantee, the lender will not offer this loan to the borrower because the lender wouldn’t want to lose their money in case of default.
Government agencies like FHA, USDA, and VA usually back guaranteed installment loans for bad credit. The government backs these organizations, and they issue loans to approved direct lenders. The installment loans are secure because government agencies back them.
How Do Guaranteed Installment Loans Work?
An installment loan for bad credit provides instant funds for people facing a financial crisis. Suppose you want to take a loan of $10,000 from a direct lender, a bank, or a credit union. If you have bad credit, it will be challenging to qualify for a loan. With installment loans for bad credit with no credit check, the lenders will offer a loan with no or minimum credit check. This will help you qualify for the loan even if you have bad credit. The following is a breakdown of the guaranteed installment loan for $10,000:
- Loan amount: $10,000
- Interest rate: 7%
- Loan term: 5 years
The above installment loans show that the lender will offer you a lump sum of $10,000 at a rate of 7% for five years. Besides this, some payday loans are short-term bad credit installment loans. These payday loans are helpful for borrowers who want to repay the loans quickly. One of the main benefits of payday loans is that they reduce the payment term. The no-credit-check installment loans are also helpful for borrowers with bad credit who other lenders have turned down.
During this period of 5 years, you will have to make fixed monthly payments to the direct lender, which will include principal and interest. You will have to make the following payment till the loan matures:
How to Apply for Guaranteed Installment Loans?
As a borrower, you’ll have to apply for an installment loan by filling out a loan application to a direct lender. You must specify the purpose of the loan request and state the reason for obtaining the funds. Lenders require a few documents with the loan request to apply for online installment loans. You must provide the following details:
- Proof that you’re a citizen and of legal age in the U.S.
- Verifiable income source with stable monthly income
- Government-issued photo ID
- Active bank account
- Active email address and phone number
Besides this, the direct lender evaluates the borrower’s creditworthiness to determine whether they can make payments on time.
Secured vs. Unsecured Installment Loans
Installment loans can be secured as well as unsecured. The secured installment loans are collateralized, which means that the direct lenders will provide funds against the borrower’s collateral. This collateral can be anything from your property, such as a house, a car, jewelry, or any personal asset with good value. If you default on the loan, the lender has the right to foreclose and take the collateral. The lender can use the proceeds from the sale of the collateral to cover the loss that resulted from providing the loan.
For unsecured loans, the lenders focus more on the creditworthiness and financial performance of the borrower. These loans do not require any collateral from the borrower. For this reason, the lenders charge higher interest rates from the borrowers as they are riskier. In default, the lenders will turn to the government agencies that backed the loans.
Frequently Asked Questions
What are the alternatives to installment loans?
Installment loans are not the only loans available for borrowers with bad credit. There are alternatives to an installment loan if you need funds to meet an expense. For example, you can get personal loans, payday loans, Cash advances, personal lines of credit, and secured loans. Online installment loans can be secured and unsecured as well.
The secured installment loans involve collateral against which the borrower can obtain funds. In case of a borrower’s default, the collateral goes to the lender’s possession to cover the losses.
What are the benefits of guaranteed installment?
An installment loan has many benefits. For example, they allow you to get funds to finance big purchases. Online installment loans have consistent monthly payments that make it easier for borrowers to manage and plan their schedules throughout the term.
Besides that, these loans also help in building credit scores as the borrower makes fixed monthly payments on time.
What are the drawbacks of guaranteed installment loans?
Some drawbacks of guaranteed installment loans include high loan costs. Since the direct lenders offer these loans primarily to bad credit borrowers, the interest rates are high, which results in high monthly payments.
Also, if the market rate declines, you still have to repay the loan at higher rates because of the fixed and pre-agreed terms. Another disadvantage is that your credit score will be affected if you miss or delay any payment. A drop in your credit score has many drawbacks, especially if you plan to apply for more loans.
Are installment loans worth it?
An online installment loan is a good option if the borrower can’t qualify for other loans. These loans are worth it if the borrower needs a huge amount of cash, but other direct lenders have already rejected them.
These loans are ideal for people with bad credit who want to consolidate debt or meet a financial emergency. An installment loan online can help borrowers quickly improve their credit scores and financial situation.
Personal loans also help borrowers improve their credit scores, as they help with debt consolidation. The lenders give reports to the major credit bureaus, and this way, the borrower’s credit score improves.
How do high-interest rates affect monthly payments?
The interest rates are applied to the loan, which the borrower has to pay along with the principal. If the interest rate is higher, the monthly payment will increase because the interest amount that has to be repaid with the principal also increases.
A longer-term will lower the monthly payments but the total cost of the loan increases. For example, payday loans are short-term loans but have high interest rates.
Concluding About Guaranteed Installment Loans For Bad Credit No Credit Check
Guaranteed installment loans for bad credit help finance a big purchase. These loans are available through banks, credit unions, and online lenders. Guaranteed installment loans for bad credit and no credit check have higher interest fees and overall cost, but they are still a good option if other direct lenders have rejected you due to your bad credit score.
Before obtaining a loan, always ensure that you’ll be able to repay the loan in the agreed loan term with fixed monthly payments. As a bonus point, learn more about personal finance and other related topics on Money-Wise.
