Best Installment Loans for Bad Credit of November 2024

• We reviewed the best installment loans for bad credit and found the best lender overall to be OneMain, based on its flexible eligibility requirements (no minimum credit score required if you apply directly with the lender) and the ability to get a loan with a cosigner. 

If you need financing for a large expense but have bad credit, you may not think a loan is an option. Fortunately, many lenders specialize in installment loans for bad credit. Learn what an installment loan is, where to find one, and how to get approved.

Compare rates on installment loans for bad credit in November 2024

Best installment loans for bad credit

The best installment loans for bad credit have lenient eligibility requirements, including a low or no minimum credit score requirement. Prequalify using a personal loan marketplace to get a quick sense of which lenders are most likely to approve your loan application. 

Prequalification won't hurt your credit score, but it isn't an offer of credit — you'll need to formally apply for a loan to see your final terms. (Once you apply, your score may drop temporarily as the lender runs a hard credit check.) It's also best to review your credit report before applying and dispute any errors that could be bringing your score down.

Methodology

Credible evaluated the best installment loans for bad credit, focusing on personal loans and based on factors such as customer experience, minimum fixed rate, maximum loan amount, funding time, loan terms, fees, discounts, and whether cosigners are accepted. Credible’s 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.

Learn more about how Credible rates lenders by exploring our Personal Loans Lender Rating Methodology.

How do installment loans for bad credit work?

An installment loan lets you borrow a one-time lump sum of money. You'll pay it back in regular intervals with a fixed payment (usually monthly) over a designated period of time, such as five years. Those consistent payments can make it easier to budget compared to a credit card. Plus you'll have an exact date for when your loan will be fully paid off.

Installment loans for bad credit typically have higher interest rates because lenders expect a higher chance of default. Loan amounts may range from $600 to well over $100,000, depending on the lender, your eligibility, and the type of loan. Repayment terms also vary depending on the type of installment loan. For example, personal loans, a type of unsecured installment loan, typically have repayment terms that range between one and seven years, but some lenders offer longer-term loans, depending on the loan’s purpose.

Installment loan example

Here's an example of how the personal loan repayment process works. Say you borrow $5,000 with a 24.99% annual percentage rate (APR). The loan term is three years. Your monthly payment would be $199 and the total cost of interest would be $2,155.82.

Types of installment loans

You can find installment loans for all types of financial needs. Common examples include:

• Personal loans: A personal loan can be used for any purpose. Most are unsecured, but a secured personal loan could help you quality more easily when you have bad credit. A secured loan means that you pledge collateral, like a home or car, that the lender could claim if you default on the loan.
• Mortgages: A mortgage is used to purchase a house, which secures the loan. There are several home loan programs with flexible credit requirements, such as FHA loans and VA loans.
• Auto loans: An auto loan uses the vehicle as collateral and allows you to spread out payments for up to 7 years.
• Federal student loans: Student loan funds are disbursed to the college or university and payments could begin either during your education or after graduation, depending on the terms.
• "Buy now, pay later" financing: Buy now, pay later loans (BNPL) let you finance specific purchases, such as a new couch. You may have an interest-free period for a few weeks, followed by monthly payments over six to 24 months.
• Home equity loan: Also known as a second mortgage, a home equity loan lets you borrow a lump sum using your equity in the property as collateral. Loan terms range anywhere from 5 to 30 years.

Related: Auto Loan vs. Personal Loan

Credit score requirements by loan type

Minimum credit scores vary by lender and by the type of loan. For example, conventional mortgages have higher credit score requirements than VA and FHA mortgages.

The table below illustrates the minimum credit scores we’ve seen available for loans within each category. Having the minimum credit score does not mean you’ll be approved for a loan. It’s also possible that with compensating factors, such as a high income and strong collateral, you could get approved with a lower credit score.

How to improve your credit

Follow these tips to improve your credit score and your chances of qualifying for an installment loan:

• Check for errors on your credit report: Get a free copy of your credit report weekly through December 2023 from AnnualCreditReport.com. Make sure there aren't any errors, like fraudulent accounts or missing payments, and dispute inaccuracies with the specific bureau as soon as possible.
• Pay down high-interest debt: Your credit score suffers when you carry a lot of debt relative to your available credit. Pay down some of those accounts to reduce your credit utilization ratio for a quick credit boost. (Credit utilization makes up 30% of your FICO score.)
• Make on-time payments: Consistently paying your bills on time each month contributes 35% to your FICO credit score, which makes it the biggest factor in your overall credit health. It's a must for rebuilding credit over time.
• Become an authorized user: Ask a close friend or relative who has good credit to add you to a credit card with a low or zero balance. You don't even have to receive a copy of the card, but the account will appear on your credit report, as will the regular payments. This can help your credit by reducing your credit utilization ratio and improving your payment history.

When to consider an installment loan for bad credit

Taking out an installment loan with bad credit can help you cover large expenses while repaying the funds on a fixed schedule. However, the interest and other fees can be quite high since lenders think you’re more likely to default on the loan. It's important to have a true need for the money rather than using it to pay for discretionary purchases, like a vacation.

Also make sure you don't borrow more than you can afford to repay. Getting behind on loan payments will just make your credit worse. And if you used any collateral to secure the loan, you put those assets at risk as well.

If you can’t qualify on your own, consider applying with a cosigner. A cosigner shares equal responsibility for repayment, but does not have access to loan funds. If you know someone with good credit who’s willing to cosign for you, it could improve your chances of getting a loan or lower your rate.

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How to qualify for an installment loan for bad credit

Lenders consider the following qualifications when reviewing applications:

• Credit score: Each lender has its own minimum credit score requirement. The higher your credit score, usually the lower the interest rate you’ll qualify for. In general, lenders would prefer a FICO credit score above 670. But in some cases, you may be able to get a personal loan with a 550 credit score.
• Income: The lender confirms your income by reviewing pay stubs or tax returns. Many lenders have income minimums which could vary from $1,000 per month to $100,000 per year.
• Debt-to-income ratio: Your debt-to-income ratio (DTI) compares your monthly minimum debt payments to your monthly gross income. Ideally, you should have a DTI less than 35% for an unsecured installment loan, like a personal loan. You may qualify with a DTI up to 50% for a secured installment loan, like a mortgage.
• Co-borrower or cosigner: If you have a co-borrower or a cosigner on your loan application, the lender will consider their credit profile, income, and DTI as well. A co-borrower is both responsible for repayment and has access to loan proceeds, while a cosigner is only responsible for repayment. Applying with a cosigner can be a good move if you have a low credit score, high DTI, or limited income.

How to apply for an installment loan for bad credit

The process of getting an installment loan with bad credit generally follows the steps outlined below:

• Compare lenders: Shop around for lenders that match your criteria, such as low minimum credit score or income requirements, then prequalify with each to get a sense of the interest rate and fees they’ll charge, plus how much of a loan they’ll extend along with repayment terms.
• Pick a loan option: Once you've prequalified with a few lenders, compare the APR on each loan as well as specific factors like loan amount, origination fee, how long it takes to fund the loan, and available repayment terms.
• Complete the application: Once you’ve decided on a lender, you're ready to complete your personal loan application. To support your application, you’ll be asked to submit copies of financial documents, such as pay stubs, bank statements, and tax returns.
• Get your funds if approved: Online lenders offer fast approval and funding times — as soon as the same day you’re approved, in some cases. Once the funds are deposited into your bank account, you may use them as needed. If you’re using an installment loan for debt consolidation, you can often request that the lender remit payment to your creditors directly.
• Make payments: Your lender will let you know when and how to make your first payment. Be sure to keep up with due dates so you can improve your credit.

Learn More: How To Get a Personal Loan

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Disclosure: Some lending partners that participate in Credible’s comparison marketplace offer loans to borrowers with scores as low as 550. Borrowers with low scores will have fewer lending options than borrowers with higher credit scores.