According to a report by the Federal Reserve, 40% of Americans can’t cover a $400 unexpected expense. When faced with a financial emergency, many people turn to installment loans to help cover the costs.
An installment loan is a type of loan that allows you to borrow a set amount of money and repay it over some time in regular installments. However, before you apply for an installment loan, there are some things you need to know.
In this article, we will discuss what you need to get an installment loan, including the requirements, application process, loan amount, interest rate, and fees. Keep reading to learn more.
Proof of Income
When applying for installment loans, the first thing you’ll want to gather is proof of income. Lenders will want to see that you have a steady stream of income to ensure you can pay off the loan.
If you have a standard 9-5 position, you’ll need at least your two most recent pay stubs. If you’re self-employed, you must provide additional documents like tax returns or bank statements to meet the installment loan requirements.
Lenders may also consider sources of income, such as alimony or child support payments.
Credit History
Your chances of qualifying for installment loans depend largely on your credit score. This is because it helps lenders see how risky or safe it is to lend you money. The higher your credit score, the more likely you’ll be approved and receive a lower interest rate.
Generally, a score of 600 or higher is considered good, while scores below 600 may make it more difficult to get approved for a loan.
If you’re concerned about your low credit score, rest assured you may still be able to apply for and receive installment loans. Note that if you do you’ll likely have to pay a higher interest rate.
You’ll find that some lenders specialize in those who have poor credit. Take your time and do your research to find a lender who can work with your credit history.
Identification
Installment loans require you to provide some sort of identification too. For example, a government-issued ID like a driver’s license, passport, or state ID card. Lenders need this so that they can ensure you meet the legal requirements for borrowing money.
To qualify for an installment loan, you must be at least 18 years old and a legal resident of the United States. Some lenders may require that you have a valid Social Security number or a checking account to qualify for a loan.
Bank Account
Most lenders will require borrowers to have a bank account. This is because they need somewhere to receive funds and make payments on installment loans. Lenders can easily transfer funds to your account and set up automatic payments.
Certain lenders may require you to have a minimum balance in your account or account history. Be sure to read the installment loan requirements thoroughly.
Collateral
Some installment loans require collateral, which is a valuable asset that the lender can take possession of if you fail to repay the loan. Common types of collateral include a car, home equity, or other property.
Not all installment loans require collateral, but if you have bad credit or are applying for a large loan amount, you may be required to provide collateral to secure the loan.
Application Process
Once you have all of the necessary documentation, you can begin the application process for an installment loan. Most lenders allow you to apply online, which can be a convenient way to apply from the comfort of your own home.
You’ll typically need to provide personal information such as your name, address, and contact information, as well as information about your income and employment. Some lenders may also ask for references or additional documentation.
Once you submit your application, the lender will review your information and decide whether to approve your loan. If you’re approved, you’ll receive the loan amount in your bank account and will need to make regular payments according to the loan terms.
Loan Amount and Interest Rate
The loan amount and interest rate you qualify for will depend on several factors, including your credit score, income, and debt-to-income ratio. Most lenders offer loan amounts ranging from a few hundred dollars to several thousand dollars, with interest rates ranging from 6% to 36% or higher.
It’s important to shop around and compare loan offers from different lenders to find the best deal. You can use online comparison tools to help you compare loan offers and see how much you can expect to pay in interest and fees over the life of the loan.
Fees and Penalties
In addition to the interest rate, installment loans may also come with fees and penalties that can increase the cost of the loan. Common fees include origination fees, late payment fees, and prepayment penalties.
Origination fees are a one-time fee charged by the lender to cover the cost of processing the loan application. Late payment fees are charged if you miss a payment deadline, while prepayment penalties may be charged if you pay off the loan early.
Make sure to read the loan agreement carefully and understand any fees or penalties associated with the loan before accepting the terms.
Alternatives to Installment Loans
If you’re unable to get an installment loan or prefer not to take on debt, there are alternatives that you can consider. Some options include the following.
- Credit counselling
- Personal savings
- Side gig
- Payment plans
Do your research to find out the best solution for your needs. You could even mix and match and work to build up your credit so that you’ll be able to apply for installment loans in the future.
Apply for an Installment Loan Today
Now you have a much better idea of what you need for installment loans. By understanding the requirements for getting an installment loan and shopping around for the best deal, you can find a loan that works for your financial needs.
The good news is that you’re already in the right place. Apply now with Tekaloan.