When you need a large chunk of money quick but don’t have those funds in your bank account, the next-best option is to take out a personal loan to offer some short-term financial relief.
Installment loans can be a great financial tool to help you cover a wide range of costs, from home upgrades to vehicle purchases, to unexpected medical costs and other sudden expenses. The other benefit of installment loans is that they provide a straightforward repayment structure, unlike other types of lending where high-interest rates and low minimum payments can paint you into a financial corner.
Here’s a look at how installment loans work, including the application process and how to get approved for an installment loan by your local lender.
Installment loans are a broad category that include loans for individuals and businesses. The defining feature of an installment loan is the repayment structure, which is typically a set number of monthly payments, at an established price.
By setting regular installment payments for the loan, borrowers have an easier time accounting for the cost as part of their financial planning. This also offers a straightforward repayment plan for lenders, resulting in a win-win scenario for both sides.
Lenders may also offer “guaranteed installment loans.” This type of loan offers a soft guarantee for any borrower who meets basic prerequisites, such as income level, credit score or other factors. While this guarantee isn’t official, since other information can force a lender to decline approval and funding, a borrower’s ability to meet these requirements puts them in a greater position for their loan application to be approved.
Borrowers start the installment loan approval process like any other loan: The first step is filling out an application, which will request basic income and financial data, as well as other personal information. In many cases, you can fill out this application online, which can streamline the approval process.
Once you apply for an installment loan with the lender, they will review the information. The lender may request additional materials, such as income verification, tax returns, or other documentation to confirm the information on the loan application. You may communicate with the lender several times during the approval process. The faster you respond to their calls and emails, the faster the approval process can proceed.
At the end of application processing, the lender will either approve you for your requested installment loan, or deny you based on the information you provided. If approved, the lender will work with you on when you can expect to receive your funds.
After the loan has been distributed, you will receive a bill for the first of your installment payments. Borrowers should make these payments on-time to avoid late fees and other costs associated with falling behind on installment loan payments.
Consumers with poor or less-than-perfect credit often worry that their credit history will make it difficult to get an installment loan. Credit is an important factor in qualifying for financing through a lender, but many financial institutions do offer loan options to borrowers with a checkered credit history.
Each lender has their own rules, criteria, and financial products designed to support borrowers with bad credit. By checking with local lenders, you might discover an installment loan option that offers amenable terms and access to the funding you need to improve your financial stability. If you’re concerned about how your credit might affect access to financing, consult your local lender to determine if your credit score and financial history qualifies you for lending options targeted to borrowers facing credit challenges.
Pre-approval is often up to the lender. Some lenders offer pre-approval, while others may decline to offer this service. Pre-approval options may depend on the type of installment loan you seek. As an alternative to pre-approval, the guaranteed loans offered by lenders may offer some assurances as you determine whether you will be able to get funding.
