Bad Credit Installment Loans – Are They the Right Choice?

With a bad credit score, your options for getting money are very limited. Most reputable lenders are not all that willing to do business with you. However, this does not change the fact that sometimes you need money and you need to find a way to get it, no matter what the consequences are. While it’s better to jump through all the hoops you can before applying for bad credit installment loans, which are also sometimes referred to as subprime personal loans, you may still find yourself in a position where these loans are the only options available to you.

Before You Apply

It’s a good idea to make sure you have no other options before getting any type of bad credit loan — even if that means asking someone you know to loan you the money. And while it’s likely that a local bank will not lend you the money you need, it still wouldn’t hurt to check. There’s always a possibility that with some collateral or a cosigner you might be able to secure the money you need through a bank offering normal interest rates. It’s a sure bet that if you go through a bad credit lender, you’ll be paying back incredibly high interest. In the long-run, this high interest could put you in worse financial shape than you were in to start with.

Shopping Around for Bad Credit Installment Loans

Once it’s pretty clear that you cannot secure your money in any other way apart from dealing with a bad credit lender, you should start shopping around. Not all bad credit lending companies are created equally. Some may offer lower interest rates than others, and you would be doing yourself a huge favor by going with the lender giving you the best rates possible. Companies offering payday installment loans, which are usually also payday loan companies, tend to come with the highest rates of interest. Payday loans are best avoided completely if possible. Before you sign any papers, call every lending office in your area to find out their average rates and terms. Don’t allow your credit to be pulled by each company you contact because it can hurt your score if you have too many hard inquiries on your report. According to My FICO, lenders see lots of inquiries on a credit report as a sign of a high risk customer. Instead, just give them a brief rundown of your financial history and ask them for a ballpark figure. You can allow them to pull your credit once you’ve made up your mind about who you want to deal with.

After the Loan Is Approved

The best thing you can do for yourself following loan approval is kill off the interest as quickly as possible since this is what is going to hurt you the most. Pay extra on your loan every single month that you can, even if you can’t give more than an additional $5 per month on top of your regular payment. Obviously it’s better to pay more than that, but even small amounts like this will put a dent in the principal amount over time. As you improve your credit rating, you can move toward borrowing money through lenders who will offer you better terms. One good thing about installment loans for people with bad credit is that many companies offering these loans do report to the three major credit bureaus, which means that by making regular, timely payments, you are also improving your score.