Best Installment Loans of March 2023

NerdWallet’s guide to installment loans

Installment loans are loans you repay in equal payments over months or years. Lenders that offer installment loans have varying interest rates, repayment plans, qualification requirements and funding times.

This guide will help you decide if an installment loan is right for your plans and outline the steps to get one.

Why trust NerdWallet? NerdWallet has rated and reviewed personal loans from more than 35 financial institutions. We collect over 45 data points from each lender, interview company representatives, go through lenders’ pre-qualification processes, and compare lenders with each other as well as other financial products. We do not receive compensation for our ratings. Read more about our personal loan star ratings methodology and our editorial guidelines.

Table of contents

Best installment loans of 2023

What are installment loans?

How do installment loans work?

Examples of installment loans

Where can I get an installment loan?

When is an installment loan a good idea?

How to compare installment loans

How to get an installment loan

How installment loans affect your credit

Bad-credit installment loans

Installment loans vs. payday loans

Best installment loans of 2023

What are installment loans?

Installment loans are so named because you receive the loan funds all at once and repay them in fixed monthly payments, or installments. Unlike credit cards with revolving credit — which you use, repay and repeat for long periods — you use an installment loan once, usually to finance a large purchase.

With a personal installment loan, you can borrow up to $100,000 and repay the loan over a term of two to seven years. Annual percentage rates are from 6% to 36%.

How do installment loans work?

After you’re approved for an installment loan, the lender deposits the funds into your bank account. You then repay the loan amount, plus interest, over the period stated in your loan agreement.

For example, if you get a $20,000 loan with a four-year repayment term and 12% APR, you’d make 48 installments of $527. An installment loan calculator can show how the loan’s interest rate and repayment term affect monthly payments.

On-time loan payments help build your credit, while missed payments can hurt it.

Examples of installment loans

Many loan types share the installment structure — you might even have one now. Here are a few examples of installment loans:

• Personal loans are fixed-rate unsecured loans that you repay in equal, biweekly or monthly payments.

• Auto loans are secured loans, usually with fixed rates, that you repay in regular installments.

• Federal student loans have fixed rates and are repaid in equal installments.

• “Buy now, pay later” loans usually let you split an online or in-store purchase into four equal, interest-free payments.

Where can I get an installment loan?

Banks, credit unions and online lenders all offer personal installment loans. Compare lenders to find one that offers the best rates, terms and loan features.

Banks

Some national banks offer unsecured installment loans. If yours does, it's likely a good place to start comparison shopping because banks sometimes offer lower rates or softer borrower requirements for existing customers.

• Small-dollar bank loans: Some major national banks have introduced new small, short-term loans in recent years. Customers of Wells Fargo, U.S. Bank, Bank of America and Truist may qualify for a loan of a few hundred dollars that is repaid in three to six equal monthly installments.

Credit unions

Credit union members may have access to low-rate installment loans, because federal credit unions cap APRs at 18%. Credit unions may review your membership standing in addition to your credit profile on a loan application, which may improve your chance of qualifying.

• Small-dollar credit union loans: Some credit unions offer a type of small personal loan called a payday alternative loan. These loans are $2,000 or less, repaid monthly over six months to a year, have an APR of 28% or lower, and may not require good credit to qualify.

Online lenders

Online lenders serve a wide range of customers. Some cater to borrowers with stellar credit, while others offer loans for bad-credit borrowers. Most online lenders let you pre-qualify to see what rate, term and monthly payment you qualify for. Pre-qualifying doesn’t affect your credit score, so you can check offers from multiple lenders.

• Small-dollar online loans: Small-dollar loans from online lenders can be tricky to navigate. Some lenders offer small loans with APRs below 36% — the maximum rate that consumer advocates say is affordable — but others charge rates well above that and may put borrowers at risk of defaulting.

When is an installment loan a good idea?

Here are three purposes for which a personal installment loan can be a good idea:

• Debt consolidation: An installment loan can roll other unsecured debts, including high-interest loans and credit cards with revolving credit, into a single, fixed monthly payment. A debt consolidation loan is a good idea if the new interest rate is lower than the combined rate on the debts you’re consolidating.

• Home repairs: There are many financing options for home improvements, but if you know how much money you need and can qualify for a low rate, an installment loan may be a good way to pay for fixes around the house.

• Emergencies: Because they can be expensive, an installment loan shouldn’t be your first choice in an emergency. Instead, consider alternatives that cost little or no interest. But, if you have a plan to make your payments and need the funds fast, an installment loan can help you get through an emergency.

» MORE: Compare emergency loans

How to compare installment loans

• Review qualification requirements. Try to find the lender’s qualification criteria, including minimum income and maximum debt-to-income ratio. Some installment lenders display this information on their website. If not, a website like NerdWallet may include it in a review.

• Compare APRs. The best installment loan is usually the one with the lowest APR and affordable monthly payments. Compare lenders’ APR ranges and pre-qualify with multiple lenders to see which one makes you the best offer.

• Look for fast funding. Some lenders can provide funds the same or next day after you apply, while others may take up to a week to deposit the loan into your account. Find a lender that offers fast funding if you need it.

• Weigh 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.

How to get an installment loan

1. Review your credit report. Check your credit report to see what a lender will see when it evaluates your application. You can get a free copy of your report at AnnualCreditReport.com. If you spot any errors, correct them before you apply.

2. Check in with your budget. Look at your income and expenses to see how much you can afford to pay toward the loan each month. Then, use an installment loan calculator to determine what APR and repayment term you’d need to get affordable monthly payments.

3. Pre-qualify. Most online lenders let you preview potential loan offers through pre-qualification. You’ll enter some information about your credit and income — as well as the loan you want — and the lender will show you possible loan amounts, rates and repayment terms. Pre-qualifying doesn’t affect your credit score, so you can review offers from multiple lenders to find the best one.

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

» Get started: Pre-qualify on NerdWallet

How installment loans affect your credit

Loans can help or hurt your credit, depending on how you use them. Since many lenders report to the three major credit bureaus, an installment loan gives you the chance to build credit and show financial responsibility by making on-time payments.

» MORE: Revolving vs. installment credit

However, if you miss a payment or fail to repay the loan, your credit score could suffer.

One way to make sure your payments are on time is to set up autopay. Many lenders offer a small APR discount — usually a fraction of a percentage point — for borrowers who use autopay.

» MORE: How to manage your loan payments

Bad-credit installment loans

If you have a bad credit score (629 or lower), you may still be able to get an installment loan on your own, but there are things you can do to boost your chances of qualifying.

• Get a co-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 using the collateral to get a loan against the risk of losing it.

• 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

High-interest installment loans for bad credit

Though you’ll ideally find an installment loan with a rate below 36%, some lenders offer high-interest loans with APRs above 36% that are more affordable than payday loans.

These lenders may not check your credit, which means they’re taking on more risk. For you, that means a higher APR — sometimes up to 150% or 200%.

While these loans may be repaid in installments, they are still unaffordable for most borrowers. Think of them as a last resort when your main alternative is a payday loan.

Alternatives to bad-credit installment loans

If you have bad credit and need money quickly, explore other low-cost options first.

• Seek assistance from local nonprofits, charities and religious organizations.

• Use a paycheck advance app to cover you until payday.

• Try other ways to make money.

If you're comfortable with it, ask family and friends for a loan through a lending circle or family loan agreement.

Installment loans vs. payday loans

While you repay an installment loan in regular installments, you typically repay a payday loan in full on your next payday.

You may have an easier time planning for and repaying a loan that’s broken into multiple payments over several pay periods.

Here are some of the differences between installment and payday loans.