If you’re looking to finance an upcoming purchase, an installment loan might be able to help. It’s a popular type of credit account that splits the cost of a purchase into payments over a fixed period of time, usually years. Whether you’re looking to buy a car, house, vacation, or make another large purchase, there’s likely an installment loan option to consider. Here’s a closer look at what installment loans are, how they work, and where you can find one.
An installment loan provides you with a lump sum of money upfront that you then repay through a series of payments, or installments, over a set term. For example, mortgages, auto loans, and personal loans are all types of installment loans. Along with requiring you to repay the principal, installment loan lenders charge you to borrow money according to an annual percentage rate (APR). Fees that can increase your borrowing costs include origination fees, documentation fees, and, in the case of mortgages, additional closing costs, such as the appraisal, attorneys fees, and discount points.
Good to know
The APR takes into account both the interest rate and any upfront fees a lender charges, such as origination fees, making it a better way to compare loan costs than using interest rates alone.
Lenders will determine what APR you qualify for based on factors like your credit profile, income, current debt, and the details of your loan request. In general, good to excellent credit and a strong income are crucial to landing a lower rate.
Advertiser DisclosureOverview
Lightstream is one of three Credible partner lenders to offer loan amounts up to $100,000, which makes it ideal for financing large expenses like home improvements or weddings. Funds are available as soon as the same day you apply, and you'll have up to 12 years to repay certain types of loans, including home improvement loans, RV loans, and boat loans. There are no origination fees, and rates are low — Lightstream's lowest APR beats SoFi's advertised lowest APR by 1 percentage point. But you'll need good credit to qualify.
Unlike most lenders, Lightstream does not let you prequalify on its site. Nor does it provide a contact phone number next to its customer service hours on its website.
Repayment terms
2 - 12 years, depending on loan purpose
Eligibility
Available in all states except RI and VT
Time to get funds
As soon as the next business day
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Overview
Upstart has one of the lowest available APRs of Credible partner lenders and of all non-partners we reviewed, making it a good choice for well-qualified applicants. However, it's also is one of few lenders that doesn't have a minimum credit score requirement (if you apply on the lender's website), which makes it an option if you have bad credit or no credit history. Upstart may charge an origination fee as high as 12%, but good-credit borrowers may not be charged one at all.
Trustpilot gives Upstart 4.9 stars, which is the highest of all lenders we reviewed.
Time to get funds
As soon as 1 to 3 business days
Loan uses
Pay off credit cards, consolidate debt, relocate, make a large purchase, and other purposes
Overview
Discover Personal Loans offers low APRs, repayment terms up to seven years, no origination fees, nationwide availability, and doesn't require your Social Security number to prequalify on its site. You'll need to have an annual income of at least $40,000, and a FICO score 660 or higher, to be eligible. If your credit score is fair or poor, you'll need to go elsewhere, as Discover doesn't allow cosigners.
Funds are available as soon as the next business day after loan approval.
Eligibility
Available in all 50 states
Time to get funds
Funds can be sent as soon as the next business day after acceptance
Loan uses
Auto repair, credit card refinancing, debt consolidation, home remodel or repair, major purchase, medical expenses, taxes, vacation, and wedding
Overview
PenFed is a credit union that offers personal loans to applicants with good credit. Though you'll need to become a member to receive a loan, membership is open to everyone. PenFed shines with no origination fees, small available loan amounts, and low interest rates. If you don't have a FICO score above 700, you may not qualify on your own, but can apply with a cosigner with good credit — which is not something most lenders offer.
PenFed doesn't have a minimum income amount, and offers live chat and an entirely online loan application process.
Fees
Unsuccessful payment fee, late fee
Time to get funds
Typically 1 to 2 business days after verification
Loan uses
Debt consolidation, home improvement, credit card refinancing
Overview
Upgrade has a suite of features that make it a very attractive lender: competitive interest rates, discounts for direct pay and autopay, as soon as same-day funding, up to seven-year repayment terms, and nationwide availability. Plus, loans are available to fair-credit borrowers, and you don't need to input your Social Security number to prequalify on the website. Upgrade even offers secured personal loans, which is not common among lenders.
However, Upgrade does charge an origination fee of 1.85% to 9.99%. You must have a FICO score of at least 600 and a minimum income of $25,000 annually to qualify.
Loan amount
$1,000 to $50,000 ($3,005 minimum in GA; $6,600 minimum in MA)
Loan uses
Credit card refinancing, debt consolidation, home improvement, major purchase, other
Overview
SoFi stands out for offering no-fee personal loans with competitive rates, high loan amounts, long loan terms, discounts for autopay and direct pay, and funding as soon as the same day. Plus, SoFi prioritizes convenience for existing and potential customers with features like live chat and an easy prequalification process that doesn't require your Social Security number.
The main catch is that you need to qualify for a loan with SoFi, which can be hard to do if you don't have good credit. You also won't be able to apply with a cosigner, since SoFi doesn't accept cosigners; nor does it offer secured personal loans.
Fees
Option to pay an origination fee (up to 6%) in exchange for a lower rate
Time to get funds
Typically within a few days, given approval and bank account verification, but sometimes within the same day
Loan uses
Solely for personal, family, or household uses
Fox Business does not make or arrange loans.
If a lender approves your installment loan application, you’ll receive the loan amount as a lump sum, which may be sent straight to you — often via direct deposit to your bank account — or delivered to another party, such as a home seller or auto dealer. Or, in the case of debt consolidation, the lender may send funds directly to your creditors — and may even offer a rate discount for it.
Once the funds are disbursed, your repayment schedule will begin. The amount you borrow, plus interest payments, will be split up into payments over a set term. If the loan has a fixed interest rate, your payment should not change. Whereas, if it has a variable interest rate, your payment can change in relation to current interest rates.
Interest is calculated monthly as you pay off the loan, so the principal amount (what you owe) decreases each month, meaning the amount of interest you pay each month decreases as well. In turn, the amount you pay toward the principal increases each month. If you want to figure out how much a loan will cost at a particular fixed interest rate, it's best to use a personal loan calculator, which can easily account for these changes.
For example, suppose you take out a five-year, $10,000 personal loan with a 10.00% fixed interest rate. In this case, the loan would cost $2,748 in interest overall, resulting in a total repayment amount of $12,748 and 60 monthly payments of about $212.
Tip
If you get a fixed interest rate, your payment amount will be the same throughout your loan term. However, if you get a variable interest rate, your payments can fluctuate based on changes in the market.
The two main types of installment loans are secured and unsecured loans. The main difference between the two is that secured loans require you to pledge collateral, such as a home or vehicle, while unsecured loans don’t. Here are some of the common types of secured and unsecured installment loans you can find on the market.
- Mortgages: Secured by the home financed.
- Auto loans: Secured by the vehicle financed.
- Equipment loans: Secured by the equipment financed.
- Secured personal loans: Used to finance personal purchases and secured by one or more of the borrower’s assets. (Though secured personal loans are offered by some lenders, unsecured personal loans are more common.)
- Personal loans: Issued to individuals for personal expenses, such as weddings, debt consolidation, and home improvements.
- Business loans: Issued to individuals for business purposes.
But how does collateral impact the borrowing experience? Collateral has a few effects on installment loans. If you end up defaulting on a secured loan, the lender can seize and sell your collateral (like your car or home) to help recover the amount you owe. As a result, secured loans present less risk for lenders, are typically easier to get, and may have lower rates relative to similar loans that are unsecured.
On the other hand, if you default on an unsecured loan, the lender has to take you to court and get a judgment before it can seize any of your assets. In either case, defaulting on a loan can have a severe negative impact on your credit score.
Installment loans are available from a wide range of financial institutions, including banks, credit unions, and online lenders. However, the types of loans available from each lender can vary. For example, a bank may offer home and auto loans while an online lender may specialize in personal loans. The first step in finding the best lender for your situation is to identify the type of installment loan you want. From there, you can research the best lenders for that particular loan type.
If you want to get an installment loan, lenders require you to meet a variety of eligibility requirements. For example, they often consider your:
- Credit reports: Lenders often review your credit reports to see your payment history, amounts owed, credit utilization ratio, hard credit inquiries, public records, and credit history length. They may have restrictions on the different report categories, such as not allowing more than two missed payments over the past seven years.
- Credit scores: A certain minimum credit score may be required.
- Income: You may need to make a minimum amount per month or year.
- Debt-to-income ratio (DTI): This is the amount of your monthly income — before taxes — that goes toward debt payments. You often need a DTI under a certain limit, such as 36% for personal loans and 41% for mortgages.
- Employment history: Your history of employment may also be reviewed to assess the stability of your income.
- Proof of identity: A government-issued ID will be required to prove your identity and legal presence in the U.S.
- Proof of address: You may need to provide proof of your address and residential history for the past two years.
- Collateral (for secured loans): If the loan is secured, the lender will need to assess the value of your collateral.
While the above requirements are common with installment loans, they’ll vary depending on the loan type you want and the lender you choose. For example, here are the personal loan requirements for Discover:
- Citizenship/residency: You must be a U.S. citizen or permanent resident with government-issued identification.
- Legal age: You must be at least 18 years old.
- Annual income: You must have a household income of at least $25,000 per year.
- Physical address: You must have a verifiable physical address.
- Email address: You must have an active email address that you can access.
- Credit score: You must have a credit score of at least 660.
Additionally, Discover runs a credit check to assess your credit history, activities, and inquiries.
Ready to get an installment loan? Here’s how to apply.
- Check your credit: Make sure your credit is in tip-top shape so you can land the best rates and terms on your loan. You can get free weekly online reports from AnnualCreditReport.com.
- Review your income: Look over your income statements so you know how much you’re currently making per month and year.
- Check your budget: It’s also essential to review your budget to see how much space you have for a loan payment. Figure out the maximum payment you can comfortably afford.
- Identify the loan type you need: Many types of installment loans exist. Identify the type you are looking for (e.g. auto loan, personal loan, business loan, etc.)
- Shop around: Shop around for lenders that look to be a good fit. Consider their loan amounts, APRs, loan terms, fees, customer service reviews, prequalification processes, funding times, and eligibility requirements.
- Collect and compare quotes: Once you have a shortlist of potential fits, see if you can prequalify with each or get preapproved for a loan. Not all lenders and loan types offer this option, but if they do, take note of the quotes each lender gives you. Compare them side by side to find the best potential deal.
- Apply: Apply with the lender that provides the best quote. You’ll often have to undergo a hard credit check (which can lower your score by a few points temporarily) and provide documents to verify your income, employment, identity, and address. If collateral is involved, the lender will typically need to appraise it.
- Sign the contract and get your funds: Upon approval, your lender will present you with a loan contract. Review it carefully and, if all looks good, sign it. The lender can then disburse your loan funds.
Note that while these are the typical steps, the application process varies depending on the type of installment loan you get and the lender you choose. For instance, a personal loan can be approved within days (the same day you apply, in some cases), while a mortgage is likely to take a month or more to close.
Generally speaking, rates on secured installment loans are lower than rates on unsecured loans. But the rate you get will depend on your credit score, credit profile, income, and debt. Here’s a look at current interest rates for personal loans:
Overview
Lightstream is one of three Credible partner lenders to offer loan amounts up to $100,000, which makes it ideal for financing large expenses like home improvements or weddings. Funds are available as soon as the same day you apply, and you'll have up to 12 years to repay certain types of loans, including home improvement loans, RV loans, and boat loans. There are no origination fees, and rates are low — Lightstream's lowest APR beats SoFi's advertised lowest APR by 1 percentage point. But you'll need good credit to qualify.
Unlike most lenders, Lightstream does not let you prequalify on its site. Nor does it provide a contact phone number next to its customer service hours on its website.
Repayment terms
2 - 12 years, depending on loan purpose
Eligibility
Available in all states except RI and VT
Time to get funds
As soon as the next business day
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Overview
Upstart has one of the lowest available APRs of Credible partner lenders and of all non-partners we reviewed, making it a good choice for well-qualified applicants. However, it's also is one of few lenders that doesn't have a minimum credit score requirement (if you apply on the lender's website), which makes it an option if you have bad credit or no credit history. Upstart may charge an origination fee as high as 12%, but good-credit borrowers may not be charged one at all.
Trustpilot gives Upstart 4.9 stars, which is the highest of all lenders we reviewed.
Time to get funds
As soon as 1 to 3 business days
Loan uses
Pay off credit cards, consolidate debt, relocate, make a large purchase, and other purposes
Overview
Discover Personal Loans offers low APRs, repayment terms up to seven years, no origination fees, nationwide availability, and doesn't require your Social Security number to prequalify on its site. You'll need to have an annual income of at least $40,000, and a FICO score 660 or higher, to be eligible. If your credit score is fair or poor, you'll need to go elsewhere, as Discover doesn't allow cosigners.
Funds are available as soon as the next business day after loan approval.
Eligibility
Available in all 50 states
Time to get funds
Funds can be sent as soon as the next business day after acceptance
Loan uses
Auto repair, credit card refinancing, debt consolidation, home remodel or repair, major purchase, medical expenses, taxes, vacation, and wedding
Overview
PenFed is a credit union that offers personal loans to applicants with good credit. Though you'll need to become a member to receive a loan, membership is open to everyone. PenFed shines with no origination fees, small available loan amounts, and low interest rates. If you don't have a FICO score above 700, you may not qualify on your own, but can apply with a cosigner with good credit — which is not something most lenders offer.
PenFed doesn't have a minimum income amount, and offers live chat and an entirely online loan application process.
Fees
Unsuccessful payment fee, late fee
Time to get funds
Typically 1 to 2 business days after verification
Loan uses
Debt consolidation, home improvement, credit card refinancing
Overview
Upgrade has a suite of features that make it a very attractive lender: competitive interest rates, discounts for direct pay and autopay, as soon as same-day funding, up to seven-year repayment terms, and nationwide availability. Plus, loans are available to fair-credit borrowers, and you don't need to input your Social Security number to prequalify on the website. Upgrade even offers secured personal loans, which is not common among lenders.
However, Upgrade does charge an origination fee of 1.85% to 9.99%. You must have a FICO score of at least 600 and a minimum income of $25,000 annually to qualify.
Loan amount
$1,000 to $50,000 ($3,005 minimum in GA; $6,600 minimum in MA)
Loan uses
Credit card refinancing, debt consolidation, home improvement, major purchase, other
Overview
LendingClub is a solid lender for good credit borrowers and some fair credit borrowers that apply directly on its website. It's easy to prequalify with LendingClub, especially if you're uncomfortable providing your Social Security number, as the company doesn't require it at the prequalification stage. (You will need to provide it if you move forward with a full application.)
While prequalification is not a guarantee that you'll be approved for a loan, LendingClub does a better job than most other Credible partner lenders at approving applicants that have successfully prequalified. In other words, you're less likely to have your application declined once you apply (if you've already prequalified). LendingClub may charge an origination fee between 3% and 8%.
Eligibility
Available in all 50 states
Loan uses
Debt consolidation, paying off credit cards
Overview
SoFi stands out for offering no-fee personal loans with competitive rates, high loan amounts, long loan terms, discounts for autopay and direct pay, and funding as soon as the same day. Plus, SoFi prioritizes convenience for existing and potential customers with features like live chat and an easy prequalification process that doesn't require your Social Security number.
The main catch is that you need to qualify for a loan with SoFi, which can be hard to do if you don't have good credit. You also won't be able to apply with a cosigner, since SoFi doesn't accept cosigners; nor does it offer secured personal loans.
Fees
Option to pay an origination fee (up to 6%) in exchange for a lower rate
Time to get funds
Typically within a few days, given approval and bank account verification, but sometimes within the same day
Loan uses
Solely for personal, family, or household uses
Overview
Best Egg is a solid lender for a wide range of borrowers and, notably, scored second for personal loan satisfaction in J.D. Power's Consumer Lending Study. It offers competitive rates, reasonable loan terms and amounts, and personal loans for fair credit. You'll need a FICO score of at least 600 to qualify, but the lower your score, the higher your APR may be. The APR includes the interest rate and origination fees, which range from 0.99% to 8.99% with Best Egg.
Note that if you successfully prequalify with Best Egg, you may be more likely to be approved for the loan relative to other lenders you prequalify with. Based on Credible data, borrowers who chose to apply for a loan with Best Egg were more than twice as likely to be approved (relative to most other Credible partners).
Fees
Origination fee, late fee, unsuccessful payment fee, check processing fee
Eligibility
Available in all states except DC, IA, VT, and WV
Time to get funds
As soon as 1 to 3 business days after successful verification
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Overview
Avant personal loans are a good choice for borrowers with bad credit looking for small- to moderate-sized personal loans. Loans are available up to $35,000 and you could get the money as soon as the next business day after approval. Plus, Avant is more likely than some lenders to approve the applications of borrowers who've prequalified with Avant. However, the lender charges an origination fee up to 9.99%, and its top-range interest rates are among the highest of the lenders we reviewed.
Fees
Origination fee, late fee, dishonored payment fee
Eligibility
Available in all states except HI, IA, MA, ME, NY, VT, and WV
Time to get funds
As soon as the next business day (if approved by 4:30 p.m. CT on a weekday)
Loan uses
Debt consolidation, emergency expense, life event, home improvement, and other purposes
Repayment terms
1 to 5 years (2 to 5 years through Credible)
Overview
It’s worth considering a personal loan through Splash if you have good credit (ideally, a FICO score above 700). The platform offers loans from a wide range of lenders, and next-day funding is available. Plus, Splash has a live chat feature so you can get real-time answers without having to wait on hold or for an email. Loans are available up to $100,000 if you apply via Splash’s website.
Rates are competitive, but borrowers with excellent credit may find lower APRs elsewhere. If you need a repayment term longer than five years, you’ll need to look elsewhere as well.
Loan amount
$5,000 - $100,000 (up to $35,000 on Credible)
Eligibility
Available in all states except VT. OH and NM net disbursed amount must be greater than $5,000. MA must be greater than $6,000
Time to get funds
Same day available, typically 1-3 days
Loan uses
Debt consolidation, home improvement, medical expenses, major purchases
Overview
Universal Credit is one of a handful of lenders that offers personal loans for bad credit. If your FICO credit score is at least 560, you may be eligible for a Universal Credit personal loan. It offers loan amounts up to $50,000, repayment terms up to seven years, and discounts for direct pay and autopay. Funds are available as soon as the next business day after loan approval.
Note that rates and fees can be relatively high — you may pay an origination fee from 5.25% to 9.99%, and APRs start at 11.69%. If you get a loan with a high interest rate, consider refinancing your personal loan at a lower rate once you've improved your credit score.
Eligibility
A U.S. citizen or permanent resident; not available in DC, IA, SC, WV
Time to get funds
As soon as 1 business day after acceptance
Loan uses
Debt consolidation, pay off credit cards, home improvements, unexpected expenses, home and auto repairs, weddings, and other major purchases
Overview
Happy Money has been in operation since 2009 (formerly known as Payoff). It's an option for fair-credit borrowers (plus those with better credit), and notably has a relatively low top-end APR. In other words, you could qualify for a lower rate with Happy Money with fair credit, relative to other lenders that offer fair-credit loans. The company does charge an origination fee on some loans, up to 5%, but that's not as high as some other lenders' origination fees.
You should be prepared to wait a few days to get your money, as funding can take three to five days once approved. And loans aren't available in Massachusetts or Nevada. Happy Money has an A+ rating with the BBB and is ideal for debt consolidation and credit card consolidation loans.
Eligibility
Available in all states except MA, MS, NV, and OH
Time to get funds
As soon as 2 - 5 business days after verification
Loan uses
Debt consolidation and credit card consolidation only
Overview
BHG Money stands out for offering the largest loan amounts — up to $200,000 — of any Credible partner lenders. Simply put, if you need an unsecured personal loan over $100,000, there are very few places to look, but BHG is one. You'll have up to 10 years to repay the loan, but you'll need an annual income of at least $100,000 to qualify and a FICO score that's 660 or higher. However, if you have a cosigner that meets these requirements, BHG will consider your application.
Loan amounts start at $20,000, so look elsewhere for small loans. And BHG charges a modest origination fee between 2% and 4%, depending on your financial profile. Loan funds are available within three to 14 days of loan approval. Note that you can't prequalify with BHG.
Fees
Origination fees, late fees
Eligibility
Available in all states except Maryland and Illinois
Loan uses
Debt consolidation, baby (adoption), engagement ring financing, moving (relocation), business, home improvement, special occasion, cosmetic procedures, major purchase, taxes, credit card refinancing, medical expenses, vacation, wedding, other
Fees
Origination Fee, $15 Late Fee, $25 NSF Fee
Eligibility
Available in all states except CO, CT, ME, NV, NH, TN, VT, WV, WY, and all U.S. Territories
Time to get funds
Funds typically deposited into your account in 1 business day13
Loan uses
Debt consolidation, credit card refinancing
Overview
OneMain Financial has multiple options for bad-credit personal loans. There is no minimum credit score required (if you apply directly with OneMain), which means you could get a loan with bad credit (FICO below 580). Plus, cosigners are allowed — a cosigner is someone (ideally, with good credit) who promises to repay the loan if you can't, which can make it easier to qualify or lower your rate. And, secured personal loans are available. You secure a loan with collateral, which may also help you qualify or lower your rate.
Rates are higher than competitors and OneMain charges origination fees as either a flat fee up to $500, or a percentage from 1% to 10% (depending on your state of residence). Note that even if you prequalify for a personal loan with OneMain, getting approved isn't a given.
Fees
Origination fee, unsuccessful payment fee, late fee
Eligibility
Must have photo I.D. issued by U.S. federal, state or local government
Time to get funds
As soon as 1 to 2 days after acceptance
Loan use
All except business, and education
Fox Business does not make or arrange loans.
An installment loan can be a good idea when the loan cost is competitive, your income is stable, and the loan payments fit into your budget with room to spare. If you have any doubts about a loan’s affordability or the stability of your income source, it’s probably best to hold off.
An installment loan will affect your credit if your lender reports the account to one or more of the consumer credit bureaus. When reported, your payment activity and amount owed, along with the loan type, loan length, and hard credit inquiry can all impact your credit. If you pay the loan as agreed, it can help to strengthen your credit over time. If you don’t, it will cause damage.
You may be able to get an installment loan with bad or no credit, but will need to apply with lenders that offer loans for bad credit. Look for those that cater to borrowers with less-than-perfect or no credit. You may also have better luck with secured loans, as the collateral lowers the risk for lenders. Or consider enlisting a cosigner. Though not all lenders allow them, a cosigner agrees to make payments if you don’t, lessening the risk for the lender, but putting your cosigner’s credit at risk — along with yours — if you default.
Meet the contributor:
Jessica Walrack
Jessica Walrack is a freelance finance writer and journalist with over a decade of experience. During that time, she’s written hundreds of articles about loans, insurance, banking, mortgages, credit cards, budgeting, and taxes for well-known publications including CBS News MoneyWatch, USA Today, US News and World, Investopedia, and The Balance Money.
