If you’re looking to make a large purchase, but you can’t afford to pay it all at once, then you could apply for an installment loan. Most installment loans require a credit check, but it’s possible to get an installment loan, and even an unsecured installment loan, without a credit check.
What Are Installment Loans
An installment loan is a type of loan that you make regular, fixed monthly payments on. Examples of installment loans include student loans, car loans, mortgage loans, and installment personal loans. Installment loans can be secured or unsecured.
How Do Installment Loans Work
With an installment loan, you will receive a lump sum of money after you’re approved for the loan. You will then have to repay the loan in fixed monthly payments, or installments, over the loan’s term. Installment loan’s terms can range from a few months or years, like for a small personal loan, to several decades, like for a mortgage loan.
Unlike credit cards, which have revolving lines of credit, you can’t get more money from an installment loan without applying for a new installment loan. And unlike payday loans, installment loans are not linked to your paycheck. Installment loans have their own repayment specifications.
Installment loans can have fees. Some installment loans charge origination fees, late fees or insufficient fund fees. Be sure to read the terms and conditions of your installment loan before accepting.
What Is the Difference Between a Secured and an Unsecured Loan
A secured loan is backed by collateral, which is something of value, in case you don’t repay the loan. The collateral can be used as payment to the lender if you don’t pay back your loan. The collateral could be a car, jewelry or your home, depending on the type and specifics of the loan.
The item you put up for collateral must have enough value that the lender accepts it to take on the risk of lending you money. The lender will usually appraise the item to determine its value. The lender will then determine how much money you will be approved for and what your interest rate will be. The value of your collateral, as well as your credit history, credit score, and income will help determine these.
Of course, you do risk losing your possession that you put up for collateral with a secured loan.
Also, if you sell or lose the item that you used as collateral before you have paid off the loan, you may need to either come up with a replacement collateral or pay some of the loan back immediately. If this happens, you should work with your lender to come up with a solution that they will accept.
An unsecured loan doesn’t require collateral. Unsecured loans are riskier for the lender, so they can be more difficult to qualify for. You may have to meet a minimum income and a minimum credit score for an unsecured loan. Unsecured loans often require less paperwork than secured loans, since there is no appraisal process. Unsecured loans typically have higher interest rates than secured loans.
How to Apply for an Installment Loan
- Compare lenders. Before applying for an installment loan, you should do your research and compare different lenders. Lenders use different methods for assessing your loan application and interest rate. You should also make sure that you understand the terms and conditions of the loan.
- Consider pre-qualifying. Some installment loans allow you to get pre-qualified, like for a mortgage loan or some personal loans. Getting pre-qualified allows you to see your potential loan amount, rates and monthly payments without affecting your credit score.
- Apply for the loan. Once you have decided which lender fits your needs and qualifications best, it’s time to apply for the installment loan. Installment loans are offered by credit unions, banks and online lenders. Each will have different requirements, like proof of income, proof of employment, proof of identity and proof of address. Some lenders will charge an origination fee. The time required to apply will also vary by lender.
- Receive the funds. Once you’re approved for an installment loan, you will receive the funds. The lender will provide the funds in a lump sum, and you will then repay the loan over a fixed time period in monthly installments.
Can You Get An Installment Loan With No Credit Check
It’s possible to get an installment loan without a credit check. However, lenders that offer installment loans without requiring a credit check usually have higher interest rates. Lenders must disclose a loan’s annual percentage rate (APR), and some installment loans may have rates of 100% or higher. This could make repaying the loan very difficult if you’re not able to keep up with the payments on time every month.
If you have bad credit (below 630 FICO score), you may still be able to get an unsecured installment loan. Some lenders have lower credit score requirements. Some lenders consider other factors besides credit, like employment, education, existing debt and bank account balances. Large banks may require good or better credit to get an unsecured installment loan, but credit unions and online lenders may work with borrowers with bad credit.
The most likely way that you’ll receive an unsecured installment loan, without a credit check, is by working with a bank, credit union or individual that you already have an established relationship with. A person or company that knows you well may be willing to offer you an installment loan, without going through the process of a formal credit check.
Alternatives to Unsecured Installment Loans
If an unsecured installment loan is not the right fit for you, there are some other options to get money needed for a large purchase.
A balance transfer credit card or a 0% APR credit card could be options if you need money quickly but don’t want to take out a loan. However, these credit cards often require a certain credit score. So if you have no credit or poor credit, you may not be eligible.
A payday loan is a small, short-term loan that you have to repay by your next paycheck. Like unsecured installment loans without credit check, payday loans usually come with high fees and interest rates, and they can be difficult to repay if you get behind.
Borrowing the money from a close friend or family member would be another way to avoid going through a credit check. You could also save money on fees and interest. However, it could put a strain on your personal relationships. Only do this option if you’re sure that you can repay your friend or family member on time and in full.
If you don’t want to go through a credit check, it’s possible to get an unsecured installment loan. However, you may face high fees, high interest rates and high risk. Your best bet is to work with someone who you have an established financial history with.