Installment loans are considered financial products that allow you to borrow a particular amount of money and repay it slowly over time. These types of loans consist of personal loans.
Personal loans have the benefit of fixed monthly payments and interest rates. As a result, you already know about the amount of payment you give every month and the due payments.
Types of installment loans
There are various types of installment loans bad credit that are designed for specific purposes. Here are some of the types that are stated below:
- Personal loan
A personal loan is considered a lump-sum loan because its duration to repay is two to five years. It is also known as unsecured. This amount of loan can be used for various purposes, such as:
- Cover the emergency expenditures
- Wedding expenses
- Home refurbishment projects
- Consolidation of debt and so on.
- Auto loan
An auto loan is known as a secured loan that is utilized to purchase the car along with the vehicle used as collateral. The duration of paying this loan is monthly for two to seven years.
You can use the auto loan calculator to estimate your monthly installment.
A mortgage loan is also referred to as a secured loan that is used for a single purpose. It is used to buy property, which means a house. The house serves as the collateral and for the security of the loan.
You must pay it for longer, generally 15-30 years. It also consists of monthly installments.
How the installment loan affects your credit
Credit strength affects the loan amount, rates, and qualified terms. If you get the installment loan bad credit, then it can affect your credit:
- Payment on time could enhance the credit record
The payment history plays an important role in improving the credit history. The payment history creates 35 percent of your score. If you make payments at the proper time, then it will boost your credit score.
If you miss any installment or late payments could have a negative impact on your credit score.
- An installment loan will stay on your credit report for a longer period.
If you pay all your loan amount, it is determined as a closed account. Closed accounts mean it is good for your credit record. It will remain to stay in your credit records for a longer time.
Is it possible to avail installment loan with bad credit
It is easy to get avail the installment loans with bad credit. But you must do the due diligence, compare multiple options, and shop around. Every lender has specific requirements, so check which one you qualify for with bad credit.