A closer look at the best installment loans

Here’s what makes our picks for the best personal installment loans stand out.

Upgrade: Best installment loans for rate discounts

Upgrade offers multiple ways to get a rate discount on a personal installment loan. You can get your rate lowered by 0.50 percentage points for setting up automatic loan payments. You can save 1 to 3 percentage points off your rate when you get a debt consolidation loan and authorize the lender to send funds directly to your creditors. Upgrade also offers rate discounts if you have another Upgrade product, such a checking account, or if you secure your personal loan with a vehicle.

LightStream: Best installment loans for home improvement

LightStream offers some of the highest loan amounts and the longest repayment terms for its home improvement installment loans. You can borrow up to $100,000 and take as long as 20 years to repay the loan (as long as it’s over $25,000).

LendingClub: Best installment loans for joint borrowers

LendingClub lets you add a co-borrower to a personal installment loan application. Adding a co-borrower with a higher credit score or income may increase your chance of loan approval or qualifying for a larger loan amount or lower interest rate.

Rocket Loans: Best installment loans for fast funding

Rocket Loans can fund a personal installment loan the same day you apply if the loan agreement is signed before 1 pm ET on a business day. Fast funding can be crucial if you need cash for an emergency.

Best Egg: Best secured installment loans

Best Egg offers two ways for you to secure a personal installment loan. You can either use a vehicle as collateral or permanent fixtures in your home, like built-in cabinets. One of the benefits of getting a secured loan from Best Egg is that the rates are lower than its unsecured personal loans.

Upstart: Best installment loans for short credit history

Many lenders rely on an applicant’s credit history to determine approval for a personal installment loan, but Upstart will consider applicants with thin credit files or no credit history at all. Instead, the lender uses an AI-based underwriting model that factors nontraditional data, like education and work experience, into the loan approval process.

Universal Credit: Best installment loans for debt consolidation

One of the top reasons borrowers get a personal installment loan from Universal Credit is to consolidate high-interest credit cards and debt. The lender offers direct payment to creditors, which streamlines the consolidation process. Universal Credit also offers a 1 to 3 percentage point rate discount if you authorize sending the loan proceeds directly to your creditors.

Avant: Best installment loans for bad or fair credit

Avant has a minimum credit score requirement of 550, which makes it a fitting choice for borrowers with bad credit (a score below 630). The lender says its typical borrower has a credit score of 652, which is considered fair credit (scores from 630 to 689).

What is an installment loan and how do they work?

An installment loan is a loan you borrow in a lump sum and repay in smaller increments, plus interest, over regular intervals of time. The interest rate is usually fixed and the payments, which are often made monthly, remain the same throughout the life of the loan.

Depending on the type of installment loan, the repayment period can last a couple months, several years or even a few decades. Auto loans, student loans, mortgage loans and personal loans are all examples of installment loans.

Personal installment loans can be used for a variety of purposes including debt consolidation, home improvement projects, car repairs, medical procedures, large purchases, weddings and travel. These loans typically range from $1,000 to $100,000 with repayment terms from two to seven years. Reputable lenders cap annual percentage rates (APRs) at 36%.

Where to get a personal installment loan

You can get a personal installment loan from online lenders, banks or credit unions. Many lenders let you pre-qualify online with no impact to your credit score. Compare loan offers from multiple lenders to find the most affordable option.

• Online lenders. One of the benefits of applying for an installment loan from an online lender is a convenient, streamlined application process that doesn’t require an in-person visit with a loan officer. Online lenders typically offer the fastest funding times. There are online lenders that cater to borrowers across the credit spectrum.

• Banks. You may be able to get an affordable installment loan from the financial institution you bank with if your accounts are in good standing. Banks are known for offering lower rates to existing customers, though you may need to have good credit to be eligible for a loan.

• Credit unions. You typically must be a member to borrow money from a credit union. Compared to other lenders, credit unions tend to have softer lending requirements and may be more accommodating to those with bad credit (a score below 630). Federal credit unions cap personal loan APRs at 18%, and some credit unions offer small payday alternative loans with shorter repayment terms and rates capped at 28%.

How to get a personal installment loan

1. Review your credit report

Lenders will check your credit report when evaluating your loan application. Checking your credit report in advance will give you the chance to spot any errors and correct them before you apply. You can view your credit report for free on NerdWallet or at AnnualCreditReport.com. Many loan providers require fair credit or better (a score of at least 630) to qualify for a loan. If you have bad credit, consider taking steps to improve your credit before applying.

2. Check your budget

Review your income and expenses to see how much you can afford to pay toward an installment loan each month. Then, use an installment loan calculator to determine what APR and repayment term you’d need to get affordable monthly payments. A longer repayment term can result in lower monthly payments, but you’ll end up paying more in overall interest. Applicants with lower credit scores can expect to pay higher interest rates.

Calculate your monthly personal loan payments

3. Pre-qualify

Many lenders let you preview potential loan offers through pre-qualification. You’ll enter some information about yourself — as well as the loan you want — and the lender will show your potential loan amount, rates and repayment terms. Since pre-qualifying doesn’t affect your credit score, you can review offers from multiple lenders to find the best one.

4. Accept a loan offer

Once you’ve chosen a lender, you’ll formally apply for a personal loan. Gather documents like W-2s, pay stubs and bank statements to make the application process go smoothly. At this time, the lender will do a hard credit pull, which can cause your credit score to temporarily dip.

» Get started: Pre-qualify on NerdWallet

How to get a personal installment loan with bad credit

The best bad-credit installment lenders offer personal loans with APRs below 36%, which is the highest rate most consumer advocates say an affordable loan can have. Many lenders that offer such loans require good or fair credit, but there are ways to boost your chances of approval if your score is lower.

• Get a joint or co-signed personal loan. Adding someone with a higher credit score or income to the application can improve your chance of qualifying or getting a lower rate. A co-borrower on a joint personal loan shares access to the funds and information about the loan. A co-signer cannot access the loan funds. In both cases, your co-applicant must repay the loan if you don’t.

• Get a secured personal loan. Putting up collateral for the loan — like a car or savings account — gives the lender something valuable to take if you stop making payments, meaning a secured loan may be easier to qualify for. Weigh the benefit of getting a secured loan against the risk of losing your collateral.

• Ask for less money. Lenders try not to provide loans that are too large for the borrower to repay. A lender may decide you qualify for a smaller installment loan than you requested. If you can combine a smaller loan with borrowing alternatives to cover your expense, you may have a better chance of approval.

» MORE: See your bad credit loan options

How to compare installment loan offers

Check the APR: Annual percentage rate — the interest rate plus any additional fees a lender charges — is the best cost-comparison tool for installment loans and other types of credit. The best installment loan is usually the one with the lowest APR and affordable monthly payments.

Calculate monthly payments: A low-rate loan is ideal, but if the monthly payments don’t fit your budget, you may need a longer repayment term or to shop for more affordable offers. Since missed payments can damage your credit score, it’s important to find an installment loan that you can comfortably repay each month.

Look for funding speed: Some personal loan lenders can provide funds the same or next day after you’re approved, while others may take up to a week to deposit the loan into your account.

Compare other features: If you have two competitive offers, compare other loan features, like credit-building tools, budgeting help and the ability to change your payment date.

Alternatives to installment loans

Buy now, pay later: “Buy now, pay later” is an installment plan you can use for a large purchase, like a laptop or mattress. When you check out online or at a store, the retailer may offer to let you split your purchase into (usually four) payments with the first due upon purchase and the rest due in two-week increments. BNPL plans typically don’t charge interest or require a hard credit pull, but because it can be easy to lose track of the due dates, it’s best to use it for one purchase at a time.

Cash advance apps: You may be able to borrow as much as $500 using a cash advance app. These apps let you borrow money from your next paycheck with no credit check and mostly optional fees. This option will only work if your budget can withstand that gap in your next paycheck.

Family loans: You likely won’t have to meet strict credit or income requirements when borrowing money from family or friends. A family loan can also save you the interest or fees a traditional lender would charge. However, you can jeopardize a personal relationship if you default on a family loan. Come up with a mutual agreement to how the loan will be repaid, put it in writing and stick to the terms.

Local financial assistance programs: There may be charities and nonprofit organizations in your area that provide assistance with bills and essential needs or offer low-cost loans for those in need. Search this database of local financial assistance programs.

Other ways to make money: If you have enough time, consider pursuing ways to make extra money, such as freelancing, testing websites, taking surveys, babysitting, dog walking or selling items you no longer use. The amount you may make can vary.