Installment loans for bad credit: A guide

Bad credit can turn borrowing money into a significant hurdle—even if you have the means to handle the repayment. The good news is that it doesn’t have to be. Many lenders offer installment loans for bad credit—giving you the chance to get the cash you need in exchange for regular monthly payments. 

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This post will explore types of installment loans for bad credit and alternative options to consider. 

What is an installment loan?

An installment loan is a type of loan that allows you to repay a lender over time via a set number of scheduled payments. Payments are typically made monthly and include the principal amount borrowed plus interest.

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This type of financing is best for borrowers with a steady income who want fixed monthly payments or to know exactly when the loan will be paid off. 

Types of installment loans for bad credit

Personal installment loans

Personal loans are generally the most popular type of installment loan on the market. These loans are very flexible, allowing you to use the funds for any purpose. With so many lenders to choose from, it’s easy to shop around for terms that work for you. 

• Loan amounts: $1,000 to $100,000; approved loan amount depends on the lender and your creditworthiness
• Repayment term: 1 to 7 years
• Requirements: Proof of income, employment verification, and a credit check

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Reputable lenders include Avant, LendingPoint, and OneMain Financial. 

Payday alternative loans

Federal credit unions offer payday alternative loans as a more affordable and safe alternative to traditional payday loans. Interest rates are capped at 28%, and you can’t have more than one loan at a time, which helps break a vicious debt cycle. To find payday alternative loan options, you’ll need to explore credit unions in your area. 

• Loan amounts: $200 to $2,000
• Repayment terms: 1 to 12 months
• Requirements: Credit union membership, valid checking account  

Title loans

Using your vehicle as collateral, you can secure a title loan. Depending on the lender, these types of loans can be repaid via installments or require a lump sum payment at the end of the repayment period. 

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Because title loans come with significantly high interest rates—roughly 25% per month—and you risk losing your vehicle, it’s best to treat them as a last resort.  

• Loan amounts: $100 to $10,000, depending on the vehicle’s value
• Repayment terms:  15 to 30 days; some lenders may extend to several months
• Requirements: Proof of vehicle ownership

Pawnshop loans

Pawnshop loans allow you to secure financing using valuable collateral, like jewelry or electronics. These are types of short-term installment loans for bad credit (no credit check required).

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Pawnshop loans also require warning as they typically have high interest rates and short repayment terms, increasing the risk of default. If you cannot repay your loan, the pawnshop has the right to seize your collateral.

• Loan amount: $50 to a few thousand dollars, depending on the item’s value
• Repayment terms: 30 to 90 days; monthly payments or single lump sum repayment
• Requirements: Approval and loan amount are based on the value of your collateral

Alternative financing options

Home equity investment (HEI)

If you’re a homeowner with sufficient equity in your primary residence or an investment property, you can access up to $500k of your home wealth with an HEI. Unlike traditional home equity loans or HELOCs, a home equity investment will allow you to tap into your equity with a low credit score—500 is the minimum requirement. There are also no income or debt-to-income requirements to qualify. 

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A home equity investment is not an installment loan; rather, you get cash upfront in exchange for a share of your home’s future appreciation. This means there are no monthly payments over the flexible 30-year term. Instead, you repay your HEI in a single payment whenever you decide to refinance or sell your home. 

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You can prequalify for a home equity investment with no impact on your credit or commitment to apply. 

401(k) loan

With an eligible 401(k) plan, you can borrow up to 50% of your vested account balance or $50,000, whichever is less. You then repay the 401(k) loan plus interest with fixed payments from your paychecks. 

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It’s important to note that you risk a serious retirement shortfall if you can’t make catch-up contributions. Consider consulting with a financial advisor before borrowing or withdrawing from your future security. 

401(k) hardship

A 401(k) loan isn’t the only way to leverage a retirement account. If your situation is dire, and you’re in need of “immediate and heavy financial need,” you may qualify for a 401(k) hardship withdrawal. It’s not a loan—you’re not on the hook for repayment. Instead, with an eligible 401(k) plan and qualifying reason, you can take enough funds from your retirement account to cover your hardship. 

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Qualifying hardships include costs related to preventing foreclosure or eviction, medical bills, funeral or burial costs, education fees, homebuying for a primary residence, and repairs to property damaged by natural disasters.

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Because you’re not required to repay the funds, a 401(k) hardship withdrawal can put your future financial security at risk. You’ll be responsible for making catch-up contributions to ensure you’re prepared for retirement. 

Frequently asked questions

What is the easiest installment loan to get approved for?

The easiest installment loans to get approved for are personal loans from online lenders and payday loans. Many online lenders specialize in providing urgent loans for bad credit borrowers—offsetting the risk with a higher interest rate.

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Payday loans, on the other hand, generally don't even require a credit check. Most payday lenders only take income into account for approval. Given payday loans come with extremely high interest rates and short repayment terms—and lack the federal regulation of payday alternative loans—it's best to treat them as a last resort. 

What credit score is needed for an installment loan?

While the required credit score varies by lender, most installment loan lenders prefer a credit score of at least 580 for approval. However, some lenders may approve loans for borrowers with a 500 credit score. To secure the best rates and terms, a credit score of 670 or higher is needed. 

How can I borrow money and get it instantly?

If you need money instantly, personal loans and cash advances can offer same-day or next-day funding. Pawnshop loans, payday loans, and title loans can also offer a quick payout, but as noted above, should be approached with caution due to the risks and rates. 

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It’s always important to approach any loan with caution and ensure you’re working with a reputable lender. 

Final thoughts

If you have the income to handle monthly payments, installment loans for bad credit can provide a financial lifeline when you need it. 

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Whether you're looking to consolidate debt, finance a renovation, or cover unexpected expenses, remember to carefully consider your options. 

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‍Homeowners with bad credit can tap into their home wealth for cash with no monthly payments. Explore more about Point’s HEI today.