Best Installment Loans for When You Need a Little Help
A broken car, wedding, medical bills, or taxes that are higher than you thought they’d be are just some of the unexpected and even expected expenses that can throw a budget off from time to time.
An installment loan can help. Providing 2 to 7 years to pay off, no collateral, and interest rates that can be affordable, the best installment loans that we’ve found can help in all kinds of situations. They’re also available if you have bad credit, though at a higher interest rate. But at least they’re not cash advances or payday loans, which can charge annual percentage rates, or APRs, of 391% or more.
Here are some of the best installment loans we’ve found. Each offers lump-sum personal loans that can be used for anything. Debt consolidation and emergency expenses are common uses, for example. The loan will be set at a fixed interest rate with the same payment made every month, and for a fixed payoff term.
- Overview of the best installment loans
- Summary of the best installment loans
- Why you should use installment loans
- Why you shouldn’t use installment loans
- The bottom line
Overview of the best installment loans
|Avant||Secured installment loans|
|Payoff||Credit card debt consolidation|
|Marcus by Goldman Sachs||No fees|
|Rocket Loans||Good to excellent credit|
Best installment loans
Avant offers installment loans for people with fair and poor credit. The company’s website, from what we can find, doesn’t list the minimum credit scores from the credit bureaus that are needed to get a loan but says that most of its customers that receive loans have a credit score of 600 to 700.
FICO credit scores range from 300 to 850. A score of 580-669 is considered fair and 670-739 is good.
Getting an installment loan and making timely payments, and ultimately paying it off on time, can improve your credit score. Using the money to pay off credit card debt can lower your credit utilization rate, which can also raise a score.
Most installment loans don’t require collateral. Mortgages and auto loans are types of installment loans that are secured by collateral, homes, and cars, in these cases.
Avant offers a similar type of loan where the money can be used for any purpose if you don’t mind putting your car up as collateral in a secured loan.
Avant offers secured installment loans where the money isn’t used to buy a home or vehicle. The money can be used for any expense, such as an emergency or remodeling a kitchen. Loan amounts range from $5,000 to $25,000, which is a smaller range than its unsecured installment loans, but the APR ranges are the same. The loan lengths are a little shorter, from two to four years, and the administrative fee almost drops in half to 2.5% of the total loan amount.
You should be aware that these loans have higher interest rates than auto loans, depending on your credit score. They’re not as bad as title loans, which loan a percentage of a car’s value at exorbitant interest rates with the car as collateral.
Lending Club is a peer-to-peer lender, which means your loan is funded directly from individual investors instead of by a traditional bank. The main benefit is that interest rates are generally lower than they are at traditional lenders, and it might be easier to qualify for a loan if you have fair credit.
Lending Club has some of the lowest minimum loan amounts around, starting at $1,000. That’s great if you expect to repay the loan soon.
What can be painful, however, are its one-time origination fees of 2-6% of the loan amount. Lending Tree gives the example of a $6,000 loan for three years at a 13.11% APR. With a one-time fee of 5%, you’d get $5,700 to spend as you’d like but would pay interest on the entire $6,000 loan. The monthly payment would be $192.37.
LightStream has very competitive interest rates on its unsecured installment loans, starting at 2.49% APR if you pay with autopay. Otherwise, its rates are 0.50% points higher. It has no loan fees.
It has some of the highest loan amounts of $100,000. The entry loan amount is a little high, however, starting at $5,000.
Those conveniences come at a cost. You should be a good credit risk to qualify for a loan from LightStream. Consumers with excellent credit get the lowest interest rates, as you’d expect from any lender, but LightStream makes it clear that most of its customers share four characteristics:
- Several years of credit history with a variety of account types.
- An ability to save, evidenced by liquid assets, cash down payments on real estate, retirement savings, and manageable revolving credit.
- Income to repay current debts and any new loan with LightStream.
- Good payment history with few, if any, delinquencies or problems paying debts.
Payoff aims its installment loans at consumers who want to consolidate high-interest credit cards. Instead of having multiple credit cards with high-interest rates, consumers can pay them off with a loan from Payoff at fixed interest rates cheaper than what they’re paying in credit card debt. The company says its members who use a Payoff loan to eliminate at least $5,000 of credit card balances see an average FICO score boost of 40 points.
Payoff loans can only be used for credit card debt consolidation. A FICO score of 640 or higher is required, and applicants must have no credit delinquencies, meaning payments that are owed and haven’t been paid.
Joint applications aren’t accepted, meaning you can only use the loan to pay off balances that are verifiable on your personal credit report.
Other than a one-time origination fee of up to 5% of the loan amount, Payoff says it doesn’t charge any other fees. These include no fees for application, early or extra payments, late payments, check processing, returned checks, or annual fees.
If you have a good income and good credit, an installment loan from SoFi can be a good option. But if times get tough and you lose your job, a personal loan from SoFi has you covered too.
SoFi offers unemployment protection on its personal loans if you’re in good standing when you request unemployment assistance. Monthly SoFi loan payments will be suspended and it will provide job placement assistance.
Interest will continue to accrue and will be added to the principal balance when the forbearance period ends, up to 12 months.
Its fixed interest rates on unsecured personal loans start at 5.99% APR, but only if you have autopay. Otherwise, the rate goes up 0.25%.
Marcus by Goldman Sachs
Some installment loan lenders take up to 6% out of a loan for a sign-up fee. That’s less money in your pocket, though you’re responsible for repaying the entire loan amount. Marcus by Goldman Sachs is one of the few lenders that doesn’t charge such a fee.
It also doesn’t charge any other types of fees, including origination fees, late fees, prepayment penalty fees, or processing fees. If you’re late making a payment, you’ll only pay the interest for the additional days.
A 0.25% APR discount is given for using autopay. If you make 12 consecutive monthly payments in full and on time, you can defer one monthly payment without incurring interest.
Marcus customers don’t have to be customers of Goldman Sachs also to qualify for a loan.
Its website has a nifty calculator that shows sample loans when you type in your loan amount, credit score range, and loan term or monthly payment amount. Some calculations that we did clearly show how having a high credit score leads to an interest rate that is more than half of what it is for someone with a fair credit score. It also calculated APRs that are higher than the 19.99% that it lists as the top of the range.
For a $10,000 loan for 48 months, the APR for each credit score range it listed was:
- Fair (630-659): 23.78%
- Good (660-699): 17.16%
- Very Good (700-739): 12.95%
- Excellent (740-850): 10.10%
Those rates don’t include a 0.25% APR drop for having autopay.
Like Lending Club, Prosper is a peer-to-peer lending platform that matches customers with investors. Whether your loan is approved depends on if investors are willing to fund it.
Proper’s entire loan process is done online. Its platform is easy to use and an online installment loan can be approved relatively quickly, usually about five business days. The initial approval can be given in a few minutes after providing some basic identifying information, such as how much you want to borrow and what it will be used for.
A soft credit check will be done initially, and a hard inquiry will be made if you’re approved for a loan.
Prosper has no prepayment penalties for paying off a loan early. It does, however, charge an origination fee of 2.41-5%, which is less money for you to use.
There are many things to like about Discover’s personal loans. It doesn’t charge an origination fee, it has some of the longest loan repayment terms around at seven years, and its online application is easy to fill out, and it can fund loans as soon as one business day.
Maybe we’re biased because our aim is to educate consumers about personal finance, but what we especially like about Discover is its range of free educational tools online. Some companies try to do this, but Discover does it particularly well.
It has a personal loan calculator, of course, and has plenty of articles and other resources to help consumers how loans work and which type is best for them. Discover gives borrowers their FICO credit score, along with information on how to interpret it.
Loans through Discover can be paid directly to creditors, and loan funds can be returned within 30 days without paying interest.
Rocket Loans is owned by mortgage provider Quicken Loans and offers unsecured personal loans at rates that are best for borrowers with good to excellent credit who can’t qualify for a personal loan without an origination fee.
Its listed loan rates require having autopay, and loan funds can be released as soon as the next business day.
Rocket Loans’ online application process is easy, starting with a soft credit inquiry that won’t affect your credit score. It has no prepayment penalties.
A downside to Rocket Loans is that it charges an origination fee of 1-6% of the loan amount. The fee is deducted from the loan balance before the remaining money is disbursed to the borrower.
Upstart funds 99% of its personal loans just one business day after signing, so if you need money fast, Upstart delivers.
The lending company was started by former Google employees, who say on the website that they’re applying artificial intelligence to the credit industry.
It says its lending model is much more accurate than traditional ones, allowing it to approve more applicants at lower loss rates. Upstart approves 27% more borrowers and yields 16% lower average APRs for approved loans than the traditional model, it says.
Upstart’s minimum credit score is 620, giving borrowers with fair credit the chance to qualify for a personal loan. As part of its AI approach, Upstart considers factors other than a credit score. These include an applicant’s education, area of study, and job history.
While Upstart doesn’t charge a fee for paying off a loan early, it collects an origination fee of up to 8% before giving out the loan funds. It also has other fees, which makes it difficult to find on its website, and include up to $15 for a late payment, and $15 for a returned check or ACH return.
Summary of the best installment loans
|Lender||APR range||Loan amount||Loan term||Origination fee|
|Avant||9.95% - 35.99%||$2,000-$35,000||2-5 years||4.75% admin|
|Lending Club||10.68% - 35.89%||$1,000-$40,000||3 or 5 years||2% - 6% of loan|
|LightStream||2.49% - 19.99%||$5,000-$100,000l||2-12 years||0|
|Payoff||5.99% - 24.99%||$5,000-$40,000||2-5 years||0% - 5%|
|SoFi||5.99% - 20.25%||$5,000-$100,000||2-7 years||0|
|Marcus||6.99% - 19.99%||$3,500-$40,000||3-6 years||0|
|Prosper||7.95% - 35.99%||$2,000-$40,000||3-5 years||2.41% - 5%|
|Discover||6.99% - 24.99%||$2,500-$35,000||3-7 years||0|
|Rocket Loans||7.161%-29.99%||$2,000-$45,000||3-5 years||1% - 6%|
|Upstart||8.41% - 35.99%||$1,000-$50,000||3-5 years||0% - 8%|
Note: Some interest rates listed require having autopay. Fees may include late fees for not having sufficient funds for autopay, among other fees. Origination fees differ from administration fees. An origination fee is only charged if you receive the loan. Most application fees are due when you apply and aren’t refundable even if the lender declined your application.
Can I pay my loan off early?
If your financial needs change and you can pay off a personal loan early, you should.
Check with each lender when you’re shopping for a loan if it can be paid off early without a prepayment penalty. Most lenders don’t charge a penalty for paying off a loan early, but some might.
Lending Club, for example, doesn’t charge a fee for making extra payments or paying off a loan in full at any time. Paying a loan off early will save you money in interest, which should be a major goal when taking out a personal loan.
Will checking my interest rate affect my credit score?
No, it shouldn’t. If a soft credit pull is done to determine if you qualify for a loan and provide you rate quotes, then it won’t affect your credit score.
However, a full credit report could be requested if you proceed with an application and choose a loan. That’s called a hard credit pull and could affect your score.
How low should my debt be?
The more debt you have, the higher your loan rate may be, or you may not qualify for a personal loan at all.
Of course, having high debt may be the reason why you’re seeking a personal loan in the first place, and lenders realize this and offer debt consolidation loans. Having a good credit score can help overcome a high debt-to-income ratio.
Lenders typically want to see a debt-to-income ratio, or DTI, of 35-40% or less. It measures your monthly debt payment to monthly gross income. If you have a DTI of 35%, it means you’re spending 35% of your gross income on debt payments. That’s usually an allowable amount for a home mortgage, and should be for a personal loan too.
Borrowers with a DTI above 43% have more difficulty paying their bills, according to some studies.
Can I pay for a vacation with a personal loan?
Yes. Most lenders want to know what you’re borrowing money for and may deny a loan for a vacation. Some, such as Discover and Marcus by Goldman Sachs, have loans specifically for vacations.
Is traveling the best reason to borrow money? Probably not, since you could be paying interest for years on it. But for a big trip or a once-in-a-lifetime experience, then a vacation loan might be right for you.
Discover provides vacation loans from $2,500 to $35,000, and you choose the repayment term. If your travel plans change within 30 days of getting the loan, you can return the money without having to pay interest.
Marcus offers vacation loans from $3,500 to $20,000, which is a lower ceiling than for other types of personal loans. Loan terms are for three to six years.
Why you should use installment loans
If you don’t have an emergency fund or enough money in savings, a personal installment loan can help cover life’s emergency expenses.
Weddings and vacations can be paid for with installment loans, but since the interest rates can be high and the loans can take years to repay, you should consider if it’s smart to pay for something that can leave you in debt for years.
An emergency, however, is another thing, and most installment loans can be funded within a day so you can get the money quickly.
Whatever you use an installment loan for, including things such as home improvements or debt consolidation so you can pay off your credit card debts at lower interest rates, you should have a plan to repay the loan as quickly as possible. One good thing about an installment loan is that it will have the same monthly payment amount, so you always know how much you owe each month. Paying it off early, however, can save you hundreds and possibly thousands of dollars in interest.
If you have good or excellent credit, then you’ll likely be approved for the best personal loan rates.
Almost all personal loans are unsecured, meaning you don’t have to use a car or other collateral to pay the loan if you don’t make payments.
Almost any amount can be borrowed in a personal loan, from $1,000 to $100,000 from the lenders we reviewed.
Why you shouldn’t use installment loans
Some installment loans have high origination fees. These one-time fees run as high as 8% in the companies we reviewed. The money is taken out of the loan amount immediately, giving you less money than you thought you were borrowing.
If you have bad credit you may not qualify for a personal loan. Even with fair credit, the interest rates can be high, so make sure the monthly payment is one you can afford before accepting a loan offer. If you have bad credit and qualify for a personal loan, it could cost as much as a credit card loan or more.
Installment loans last two to 12 years, depending on which lender you choose. Even two years can be a long time to make loan payments, so make sure you can afford it and that the reason you’re borrowing the money is worthwhile. Paying a loan off sooner will cost less.
While the payments are the same every month, a personal loan must be paid back on time. If a monthly payment is missed, a lender may charge a fee of around $15. Some lenders, such as Marcus by Goldman Sachs, don’t charge any fees, and only make their money from interest charged on loans.
Personal loans shouldn’t be used for some things, such as paying student loans. For those, you’re better off refinancing your student loan into a lower interest rate.
The bottom line
Personal loans can be a smart way to cover an emergency expense.
In an hour or less you can shop for personal loans online and find one that fits your needs but still doesn’t cost a lot. Look for one without origination fees and low APRs.
Make sure you can afford the loan, and pick a short-term loan that you can manage payments on so you can pay less interest.