Best installment loans for bad credit in November 2024

According to Experian, between 16% and 26% of Americans have a poor credit score, depending on which credit score model is used. If you fall in that camp, it's crucial to apply with a lender that offers loans for bad credit. It's ideal to take steps to improve your application as well. 

We cover which lenders to consider, how to improve your approval odds, what to watch out for with bad-credit lenders, and loan alternatives if you can't qualify.

Compare the best installment loan rates for bad credit of November 2024

Best installment loans for bad credit

Prequalify with lenders to compare rates and get a sense of which might offer you a loan before you apply. Prequalification is not an offer of credit, but it won't hurt your credit score. Once you apply for a loan, the lender will conduct a hard inquiry which could temporarily reduce your score.

Methodology

We evaluated over 20 lenders to determine which offer the best installment loans for bad credit based on multiple factors, including minimum credit score requirements, customer experience, minimum fixed rate, maximum loan amount, funding time, loan terms, fees, discounts, and whether cosigners are accepted. Our team of experts gathered information from each lender’s website, customer service department, directly from our partners, and via email support. Each data point was verified by a third party to make sure it was accurate and up to date. 

Read our full lender rating methodology for more information.

How do installment loans for bad credit work?

Installment loans for bad credit operate similarly to most other types of installment loans. They have a fixed interest rate and monthly payment that you’ll make over the duration of the loan. Depending on what type of installment loan you get — such as a personal loan, auto loan, or home loan — your loan term could last from one to 15 years.

Available loan amounts also depend on the type of installment loan. For example, personal loans offer amounts that range from under $1,000 to well over $100,000. Loan amounts are typically received as a lump sum to use for your intended loan purpose.

Where to find an installment loan for bad credit

Installment loans for bad credit can be accessed through banks, online lenders, and credit unions. The best options will feature reasonable annual percentage rates (APRs), lenient credit score minimums, few fees, several repayment term options, and allow co-signers.

How to get an installment loan with bad credit

It may be hard to receive approval for a loan with bad credit. If you are unable to qualify, some lenders allow you to add a co-borrower, or joint applicant, or a co-signer. The difference between them is that a co-borrower has equal access to loan funds, while a cosigner does not have access. Both are responsible for the loan and on the hook if you miss payments.

Applying for a loan with someone who has good credit can increase your chance of approval and even lower your rate. While there are only a handful of lenders who accept co-signers, more let you apply with a co-borrower. The difference is that a co-borrower will have equal access to the funds while a co-signer does not.

Installment loan example

Here is an example of a cost breakdown if you receive a personal loan for $10,000 at an interest rate of 30% with a repayment term of four years.

• Loan amount: $10,000
• Interest rate: 30% annually
• Loan term: 4 years (48 months)

First, let's calculate the monthly payment using the formula for an installment loan:

Monthly Payment = A [ m(1 + m)^n ] / [(1 + m)^n – 1]

Where:

• m = monthly interest rate = annual interest rate / 12
• n = number of payments = loan term in months
• A = the loan amount

So:

• m = monthly interest rate = 30% / 12 = 0.025
• n = number of payments = 4 years × 12 months / year = 48 months

Now, plugging these values into the formula:

• Monthly Payment = 10,000 × [0.025(1 + 0.025)^48] /[(1+0.025)^48 - 1] = $360.06

So, the monthly payment would be approximately $360.

Now, let's calculate the total amount repaid over the 4-year term:

• Total amount repaid = monthly payment × number of payments

Total Amount Repaid = 360.06 × 48 = $17,282.88

So, over the 4-year term, you would repay approximately $17,282.88 in total, including both the principal amount and interest, which means you would pay $7,282.88 in total interest.

It’s often easier to use a personal loan calculator to quickly determine your monthly payment and total interest costs.

Types of installment loans for bad credit

While there are several types of installment loans you can choose from, some will be riskier than others.

Personal loans

A personal loan is money you can borrow in a lump sum with fixed payments to finance large purchases, consolidate debt, invest in yourself, or cover emergency expenses. Interest rates can range from as low as 8% to up to around 36%. The average personal loan interest rate for a two year term is 12.49%. However, borrows with bad credit (300-579) should expect higher rates — closer to 35.99%.

Most personal loans are unsecured, meaning you don’t need to put up collateral to get a loan. Terms generally range from less than 1 year to 7 years, but some lenders offer longer terms, up to 15 years, depending on the loan’s purpose. For instance, some personal loans for home improvement have terms up to 12 or 15 years, depending on the lender. Like other installment loans, personal loans are available through banks, credit unions, and online lenders.

Home equity line of credit (HELOC)

If you are a homeowner with sufficient home equity, you may have the option to leverage a portion of your home's equity through a HELOC. Like a credit card, a HELOC permits you to access funds, repay them, and reuse the line as needed.

HELOCs typically have variable interest rates, meaning the rate can fluctuate with market conditions. If you qualify for a HELOC, you’ll be given a credit limit based on your available equity in your home. You can usually tap up to 80% or 85% of your home’s value minus outstanding mortgage balances. Repayment terms can vary from five to 30 years. However, your home is collateral, so failure to meet payments may result in foreclosure.

Auto loans

An auto loan, or car loan, is a loan you get to purchase a vehicle. Auto loans are secured, meaning lenders can repossess your car if you default on the loan. Loan terms often range from 2 to 7 years.

Student loans

Student loans, whether federal or private, are used to help pay for college. Some loans are based on need, while others aren’t. Federal student loans usually don’t require a credit check, but private loans do. There are various types of repayment plans, some with equal payments and some with payments that change based on your income.

“Buy now, pay later” (BNPL) loans

BNPLs are a type of installment loan that allows you to purchase something immediately with little or no initial payment and pay off the balance over four or fewer payments. Typically, BNPL loans are available when shopping online, but you may find them in stores, too. Most don’t charge interest, but instead charge late fees for missed payments.

BNPL loans often don’t require a credit check, but if you are using a BNPL in-store for a larger purchase, a credit check may be required. You should also be aware that BNPLs don’t have a lot of the protections that other installment loans have. For example, BNPL loans don’t offer dispute protections like on credit cards if the item you purchase is faulty or a scam.

Credit builder loans

A credit builder loan is designed to help you build up credit if you have little to no credit history. In a traditional loan setup, you would receive the funds upfront and repay them gradually. However, with a credit builder loan, the lender deposits the loan amount into a savings account or CD while you make monthly payments. Once you complete all of the payments, you’ll receive the full loan amount. This method of holding the funds in a secured account until the loan is fully repaid serves as a protective measure for the lender.

As you make your payments, the lender reports them to at least one major credit bureau (TransUnion, Equifax, or Experian). Credit builder loans don’t require a credit score to qualify, but you will need to have proof of sufficient income.

Payday alternative loans

Unlike payday loans, payday alternative loans (PALs) are small loans offered by national credit unions. They’re meant as a low-cost alternative to high-interest payday loans, and they tend to have longer terms.

PALs offer loan amounts up to $2,000 with repayment terms up to 12 months. Application fees are capped at $20, and rates are capped at 28%.

How to improve your credit

Your credit score is made up of five major factors: payment history, amounts owed (credit utilization), length of credit history, new credit, and credit mix. Improving your credit in each of these areas can help improve your credit score overall.

• Pay on-time and in-full, every time: Creating a budget for your monthly expenses may help you improve your overall payment history. Budgeting can help you account for a new expense and let you know if you can afford to make payments for a loan or line of credit.
• Maintain a low credit utilization: Your credit utilization ratio is the percentage of available credit on your credit cards and lines of credit. The lower the percentage, the better. There is no specific percentage that indicates bad credit utilization, however, around 30% is when you may start to see negative effects to your credit score.
• Don’t close old credit cards: The longer your credit history, the better for your credit score. So don’t close your oldest credit cards, even if you don’t use them anymore. This also can help keep your credit utilization low.
• Keep an eye out for mistakes on your credit report: Mistakes happen, and they can be costly. Check your credit report periodically at AnnualCreditReport.com for mistakes, and file a dispute with the appropriate bureaus if you find any mistakes.
• Don’t regularly apply for new credit: Applying for multiple accounts in a short amount of time can signal to lenders that you’re a risky borrower. Plus, applying for credit can temporarily lower your credit score. However, if you’re rate-shopping a mortgage or auto loan, FICO scoring models will treat multiple inquiries as 1 if they occur within either 14 days or 45 days, depending on the FICO scoring model used.
• Become an authorized user: If you have a friend or family member who’s willing to add you as an authorized user on their credit card, it could increase your available credit, increase your length of credit history, and add to your positive payment history. However, it’s important that the account is in good standing, the owner makes on-time payments, and the balance is low. Otherwise, becoming an authorized user could potentially hurt instead of help your credit score.

When possible, prequalify with lenders instead of submitting a formal application. This won’t impact your credit score, but gives you an idea of the rate and terms you might qualify for. Note that a hard credit pull — which does affect your score — will follow when you submit a formal application. Prequalification is not an offer of credit, and final rates may be higher.

Learn more: How does a personal loan affect your credit score?

When to consider an installment loan for bad credit

Getting an installment loan with bad credit isn’t always a good option — primarily because they often have higher interest rates and fees. But sometimes, an installment loan might be your best option depending on your situation.

• You can’t cover an emergency expense: If you need help covering an emergency like car repairs or medical expenses, an installment loan can provide funds from less than $1,000 to more than $100,000.
• You need to make repairs to your home: Some home renovations, like upgrades and remodels, can wait until you improve your credit. However, repairs addressing safety concerns may be urgent and require a home improvement loan immediately.
• You can get a lower interest rate than you currently have on other debts: With an installment loan, you can consolidate debts by using the new loan to pay them off. If you can get a lower interest rate with an installment loan, you could end up saving money and lowering your payment.

In general, installment loans are only a good idea if you can afford the monthly payments. If you’re unsure about your ability to pay off the loan, use a loan calculator to estimate payments.

Check out: Best emergency loans for poor credit

Pros and cons of installment loans for bad credit

Pros

• Finance big expenses: Installment loans give you a way to finance expenses that are an investment, home repairs.
• Fast cash, in some cases: Personal loans for emergencies can help with unexpected expenses.
• Debt consolidation: You can use an installment loan to consolidate your debt and secure a lower interest rate.
• Improve your credit score: Paying back your loan on-time and in-full can improve your credit score.
• Fixed payments: With fixed-rate loans, monthly payments are consistent and predictable.

Cons

• Could hurt your credit: Defaulting on a loan — or even missing payments — can hurt your credit score.
• High interest: Interest payments can add up quickly, especially with a high rate, which bad-credit loans are likely to have.
• Fees can be high: Fees, like origination fees, tend to be higher on installment loans for bad credit relative to good-credit loans.
• More debt: Taking out an installment loan could increase your debt burden if you’re not using it to consolidate.

How to qualify for an installment loan for bad credit

Installment loans for bad credit often have less stringent eligibility criteria. But to get any loan, you still have to meet certain qualifications:

• Credit score: Minimum credit score requirements vary by lender. Installment loans for bad credit have low — or sometimes no — credit score requirements.
• Income: You’ll need to show lenders that you have a steady source of income and enough money to repay the loan.
• Debt-to-income ratio (DTI): Your DTI tells lenders the amount of debt you have compared to your gross monthly income. Lenders like to see a DTI under 36%, though some accept higher. You can calculate your DTI by dividing your minimum monthly payments by your gross monthly income.
• Age: You typically have to be 18 or older to qualify for a loan.

You’ll also likely need the following documentation to qualify for an installment loan for bad credit:

• Form(s) of identification: driver’s license, birth certificate, passport, certificate of citizenship, etc.
• Proof of income: tax returns, W-2s, 1099s, bank statements, etc.
• Proof of address: utility bill, lease agreement, insurance policy with your address on it, etc.

How to apply for an installment loan for bad credit

The application process to get an installment loan for bad credit varies slightly by lender, but in general, take the following steps to get a loan:

1. Compare lenders: Shop around for the best installment loans for bad credit, knowing you may not be eligible for every loan. Compare things like fees, interest rates, loan maximums, credit score requirements, term options, and the time it takes to get the funds.
2. Pick a loan option: Prequalify with several lenders, if possible, to get an estimate of your loan rate and terms. (Remember, this doesn’t impact your credit score.) Then, pick which looks best. Keep in mind the longer the term, the more you’ll end up paying in interest. But longer terms usually also come with lower payments. It’s better practice to have an affordable monthly payment than lower interest over the life of the loan.
3. Complete the application: Applications vary by lender, but you’ll generally need to provide proof of identification and income documentation. Many lenders have an online application, though in some cases you may be able to apply in person if you prefer.
4. Get your funds: After the lender reviews your application and verifies your information, they’ll be able to approve you for the loan. Once approved, funding times can vary from as little as one business day to five or more business days.

Alternatives to installment loans for bad credit

• Bankruptcy: Bankruptcy offers a legal framework for you to address overwhelming debts and obtain a fresh start financially. Unlike installment loans, which provide temporary relief, bankruptcy can discharge or restructure debts entirely. But bankruptcy stays on your credit report for up to 10 years, depending on the type you file. Research bankruptcy resources and consult with a bankruptcy attorney to fully understand the repercussions.
• 401(k) loans: A 401(k) loan allows you to borrow against your retirement savings without undergoing a credit check or affecting your credit score. The interest rate is typically just 1% to 2% over the prime rate (currently 8.5%), which is much lower than what you’d likely qualify for elsewhere. Plus, the interest goes back into your account. However, you could face steep taxes and penalties if you can’t pay the loan back, and might lose out on future growth.
• Credit counseling: If you’re struggling with debt, reach out to a certified credit counselor in your area through the National Foundation for Credit Counseling. They can review your situation, suggest an actionable plan, and may even be able to negotiate your interest rates and payments.
• Assistance from charities, nonprofits, and government organizations: Depending on your circumstances, financial situation, and geographical location, you may qualify for assistance with medical treatments, home financing, educational expenses, and even everyday living expenses. Visit 211.org for resources in your area.

FAQ

What can I use installment loans for?

Installment loans can be used to pay for a wide range of expenses, including medical expenses, home improvements and repairs, debt consolidation, and more. Note that individual types of installment loans may have limits on how you use them. For example, you generally can’t use a personal loan to pay college tuition.

Where can I get an installment loan for bad credit?

You can find installment loans for bad credit online as well as at banks, credit unions, and other lending companies. Depending on the type of installment loan you’re seeking, you may be able to prequalify online or get funding as soon as the same day.

Payday loan vs. installment loan

Payday loans tend to have much higher interest rates than installment loans — over 600% APR, in some cases — and generally don’t require a credit check. Payday loans are typically due in a single lump sum payment on your next payday, while installment loans are repaid in a series of monthly payments over years. Installment loans generally offer higher loan amounts, while payday loans are small — typically $500 or less.

What are the typical interest rates for installment loans for bad credit?

According to Credible data, the average APR borrowers with FICO scores below 599 prequalified for was 31.39% (on a five-year loan). But rates can vary widely, depending on your exact credit score, whether you apply with a cosigner, and your income. Unsecured personal loans tend to have higher interest rates than secured loans because they don’t require collateral.

Read more:

• Where to get a personal loan
• Best debt consolidation loans
• Best emergency loans
• Best fast personal loans
• Best loans for bad credit
• Best online loans
• Best personal loan rates