Bankrate's guide to choosing the best installment loan
Reviewed by
Mark Kantrowitz, Bankrate Financial Review Board memberAs of Wednesday, June 23, 2021
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When shopping for an installment loan, compare APRs across multiple lenders to make sure that you’re getting a competitive rate. Also look for lenders that keep fees to a minimum and offer repayment terms that fit your needs.
Loan details presented here are current as of the publish date, but you should check the lenders’ websites for more current information. The installment loan lenders listed here are selected based on factors such as APR, loan amounts, fees and credit requirements.
Best installment loans of 2021
| Marcus by Goldman Sachs |
6.99%–19.99% (with autopay)
|
3–6 years
|
$3,500–$40,000
|
Not specified
|
Good credit
|
| LendingClub |
8.05%–35.89%
|
3 or 5 years
|
$1,000–$40,000
|
600
|
Peer-to-peer lending
|
| Upstart |
7.86%–35.99%
|
3 or 5 years
|
$1,000–$50,000
|
600
|
Fair credit
|
| LightStream |
2.49%–19.99% (with autopay)
|
2–12 years
|
$5,000–$100,000
|
Not specified
|
Large loan amounts
|
| Payoff |
5.99%–24.99%
|
2–5 years
|
$5,000–$40,000
|
640
|
Debt consolidation
|
| SoFi |
6.11%–18.85% (with autopay)
|
2–7 years
|
$5,000–$100,000
|
680
|
Unemployment protection
|
| Avant |
9.95%–35.99%
|
2–5 years
|
$2,000–$35,000
|
Not specified
|
Bad credit
|
Summary: Installment loans of 2021
What is an installment loan and how does it work?
Installment loans are financial products that let you borrow a fixed sum of money and pay it back slowly over time. These loans, which include personal loans, typically come with the benefit of fixed interest rates and fixed monthly payments, so you always know how much you owe each month and when your final payment will be due.
Say you were to borrow $30,000 with a 10.99 percent APR and a 60-month repayment timeline. You would pay $652.12 a month for five years.
What can I use an installment loan for?
One of the attractive features of an installment loan is its versatility. You can get an installment loan to pay for a major purchase, such as a car or a home. A personal loan, which is a type of installment loan, can typically be used for a variety of purchases. They can be used to pay for:
- A car.
- A home.
- Debt consolidation.
- A wedding.
- Home remodeling projects.
- Emergency expenses.
Types of installment loans
There is a wide range of installment loans, all designed for specific purposes. Here are some of the most common:
- Personal loan: A personal loan is a lump-sum loan that's usually repaid in two to five years. It's usually unsecured, and the money from the loan can be used in myriad ways: to consolidate debt, fund home improvement projects, pay for a wedding, cover emergency expenses, and more.
- Mortgage: A mortgage is a secured loan that is used for a single purpose: to buy property, usually a house. The home serves as collateral and secures the loan, which is paid monthly over a long term, usually 15 or 30 years.
- Auto loan: An auto loan is a secured loan that is used to buy a car, with the vehicle serving as collateral. The loan is paid monthly, typically in two to seven years. Use our auto loan calculator to determine what your monthly payment might be.
Can I get an installment loan if I have bad credit?
Installment loans for bad credit are certainly out there. But you’ll need to do your due diligence, shop around and compare several options. Every lender has different eligibility requirements, so check to see which you might qualify for with shaky credit. You can also expect your installment loan to have a higher interest rate, and possibly more loan fees, such as origination fees.
How an installment loan affects your credit
The strength of your credit impacts the loan amounts, rates and terms you qualify for. Once you get an installment loan, here's how it can impact your credit:
- Making on-time payments could boost your credit score. As payment history makes up 35 percent of your score, being on time with your monthly payments can help your credit. On the flip side, being late or having missed payments could negatively impact your score.
- Paying the loan in full can improve your credit. While paying the loan off on time and in full can bump up your score, paying it off early most likely won't have a huge impact over paying it off on the agreed-upon schedule.
- It'll stay on your credit report for 10 years. Once your loan is paid off, it's considered a closed account. Closed accounts that are in good standing could do good for your credit, as they stay on your credit file for 10 years.
Details: Best installment loans in 2021
Overview: Marcus by Goldman Sachs offers installment loans with competitive interest rates and no fees. You can borrow up to $40,000 with a fixed interest rate and fixed repayment timeline, making it easy to budget for your loan payments over time. While Marcus doesn't list any specific credit score requirements, it's likely that you'll need a score of at least 660 to qualify.
Perks: Interest rates are low for consumers with good or excellent credit, and you can even secure a 0.25 percent rate discount when you sign up for autopay. There are also no sign-up, prepayment or miscellaneous fees.
What to watch out for: Marcus doesn't allow co-signers, and it doesn't list any specific eligibility requirements, so it's hard to know if the lender is a good option for you.
Read Bankrate's expert Marcus by Goldman Sachs Review
LendingClub: Best peer-to-peer installment loan
Overview: LendingClub is a peer-to-peer lender, meaning you receive your loan funds from individual investors instead of from a traditional bank. You can borrow money for nearly any reason, ranging from debt consolidation to home improvement projects.
Perks: LendingClub makes it easy to get prequalified online and without a hard inquiry on your credit report.
What to watch out for: LendingClub installment loans can come with an origination fee of 3 percent to 6 percent of your loan amount.
Read Bankrate's expert LendingClub Review
Upstart: Best for fair credit
Overview: Upstart is an online installment loan lender that offers competitive loan products to borrowers with good or even fair credit. You can apply for your loan online and get your money as soon as the next business day.
Perks: Upstart looks at more than your credit score when approving you for a personal loan. It also considers your education, area of study and job history.
What to watch out for: Upstart’s interest rates can be on the high side for consumers with imperfect credit, with rates capping at 35.99 percent APR. Also watch out for origination fees as high as 8 percent of your loan amount.
Read Bankrate's expert Upstart Review
LightStream: Best for large loan amounts
Overview: LightStream offers installment loan amounts up to $100,000, as well as some of the lowest interest rates for consumers with excellent credit. You can also apply online and have access to your funds within the same day.
Perks: LightStream offers a discount on your APR when you sign up for autopay, and you can borrow considerably more with this lender than you can with some competitors — up to $100,000. These loans also come with no fees.
What to watch out for: While LightStream's website doesn't list specific eligibility requirements, it does mention that LightStream borrowers typically have several years of credit history with a variety of accounts, such as credit cards, auto loans and mortgages. If you don't fit this profile, LightStream may not be the best fit.
Read Bankrate's expert LightStream Review
Payoff: Best for debt consolidation
Overview: Payoff is an online lender that gears its installment loans toward consumers who need to consolidate high-interest credit card debt. Interest rates start at just 5.99 percent APR, and these loans don’t come with common fees like prepayment fees, application fees or even late fees.
Perks: Because Payoff offers loans solely for credit card debt consolidation, borrowers can focus on repaying existing debt and boosting their credit scores. Borrowers can also take advantage of free FICO score updates, cash flow assessments, quarterly check-ins during the first year and more.
What to watch out for: Payoff installment loans can charge an origination fee of up to 5 percent of your loan amount. Payoff is also not the right choice for anyone looking to use a loan for anything other than credit card debt consolidation.
Read Bankrate's expert Payoff Review
SoFi: Best for unemployment protection
Overview: While SoFi is mostly known for its popular student loan refinancing products, it also offers installment loans with long repayment timelines. SoFi also offers unemployment protection that allows you to temporarily pause your monthly payments in the event that you lose your job.
Perks: SoFi installment loans don’t charge any fees, and you may be able to borrow up to $100,000 depending on your income and other factors.
What to watch out for: These loans are geared toward consumers with good credit, so you’ll need to have a credit score of at least 680 to get approved.
Read Bankrate's expert SoFi Review
Avant: Best for bad credit
Overview: Avant focuses on installment loans for consumers with fair and poor credit, so it may be a good option if your score falls in this range. Interest rates start at 9.95 percent APR, so it’s possible to get a reasonable rate and save money on debt consolidation or any other loan purpose.
Perks: Avant lets you get prequalified online without a hard inquiry on your credit report. It also serves a wider range of credit scores than many other lenders. While Avant doesn't have a hard minimum credit score, most of its customers fall in the 600 to 700 range.
What to watch out for: Watch out for administration fees, late fees and dishonored payment fees. Interest rates can also be high for consumers with the lowest credit scores, peaking at 35.99 percent.
Read Bankrate's expert Avant Review
How to find the best installment loan rates
Finding an installment loan with the best rates largely hinges on factors such as your credit and finances. It's also a matter of knowing what to look for when shopping. Here's what you can do to find the installment loans with the most favorable rates:
- Check your credit. Review your credit to make sure there aren't any errors. Certain types of discrepancies, such as whether you were late on a payment, could ding your score.
- Practice healthy habits for maintaining a good score. If your credit file is thin or you're working on building good credit, be sure to make on-time payments, keep your debt-to-income ratio low and consider having a mix of credit.
- Research eligibility requirements: While your credit score is one of the most important factors in determining your eligibility, lenders may also look at your income and debt-to-income ratio. If your credit is fair or bad, look for lenders that don't weigh credit scores as heavily and that might look at your income to determine your creditworthiness.
- Look at repayment terms: Most personal loan lenders set repayment terms at two to five years, although some offer terms as long as 10 years. Choosing a shorter repayment term will increase your monthly payment but will decrease the interest you’ll pay overall. If you can't snag the best interest rates because of your credit score, shortening the time you take to pay your loan off could help you save money.
Read our reviews of personal loan lenders to see which lender might be right for you.
Frequently asked questions about installment loans
Are there no-credit-check installment loans?
There are lenders that offer long-term installment loans with no hard pull on your credit report. But note that obtaining financing from a lender that doesn't check your credit isn't typically a good idea. Without credit checks, lenders can't gauge your creditworthiness and ability to repay.
No-credit-check lenders may bill themselves as alternatives to other last-resort sources of cash, such as payday loans and car title loans, but consumers should proceed with great caution. "Applicants who are looking for lenders who aren't going to check their credit are doing so because they either have lousy credit or they have no credit," says John Ulzheimer, an Atlanta-based expert on credit reports and identity theft. "Either way, they're high-risk borrowers. As such, the terms they'll be paying are going to be punitive when compared to normally underwritten installment loans."
He continues: "If lenders cannot access your credit reports and scores, then they're going to subsidize their risk some other way. That means lower loan amounts and higher rates." If you have your credit checked with a mainstream lender, you'll likely find higher loan amounts, longer repayment timelines and better rates.
The installment loans we profiled here are unsecured, meaning you don’t have to provide any collateral to qualify. With that being said, secured loans, which require collateral, are also available and may be your best option if you have poor credit.
How do installment loans work for debt consolidation?
Installment loans are popular for debt consolidation due to the fact that they tend to offer lower interest rates than credit cards. For example, if you have multiple lines of credit card debt at an 18 percent APR, you can save money by transferring that debt to an installment loan at a 9 percent APR. That way, you pay less in interest and can focus on paying one fixed bill instead of several.
How are installment loans different from payday loans?
Payday loans are secured by your paycheck. When you get a payday loan, you give the lender a postdated check to deposit on your next payday, or the lender may require authorization to directly withdraw the money from your bank account after you get paid. Payday lenders charge exorbitant fees and can send the borrower into an endless cycle of mounting debt.
Can you have multiple installment loans?
Having multiple installment loans is not only possible, but also fairly common. If you're paying a mortgage and making car payments, that's already two installment loans.
What happens if I default on an installment loan?
If you default on an installment loan, your credit score will take a hit. When your credit score tumbles, lenders see you as being riskier. In turn, you might not qualify for the most favorable rates and terms on future loans — if you can even qualify for another loan. If you happen to secure your installment loan with something of value, the lender may have the ability to seize the collateral you provided.
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