Before you take out an installment loan, find out how it can affect your credit.
Taking out any type of loan can have a positive or negative impact on your credit report. Make all of your repayments on time and an installment loan can strengthen your credit rating. But late or missed repayments show up on your credit report for years, making it difficult to qualify for other types of financing.
If you’re applying for an installment loan, you might want to check your credit report first even if you haven’t ever missed a payment. Sometimes lenders make mistakes that can be easily fixed.
What is an installment loan?
An installment loan is type of financing where you borrow a lump sum of money and pay it back in installments over a period of time, usually between six and 60 months. Lenders typically charge both interest and fees on an installment loan, unlike the fixed fees that come with a payday loan. This type of loan is meant to help finance large purchases, such as buying a car.
People need money at the most inopportune times. Let’s say you have a low income and negligible savings in your name. In addition to this, you don’t even have higher credits. Suppose something terrible happens and you need money, what will you do? In this type of situation where there is an emergency, people go for shortcuts to get them the required amount and investigate the repayment options later. This is one of the biggest mistakes you can make.
How long does an installment loan appear on my credit report?
How long an installment loan appears on your credit report depends on whether you currently have an installment loan and have been on time making payments.
- If you had an installment loan and it’s been paid in full. The account will remain on your file for up to 10 years from the date of last activity (DLA).
- If you currently have an installment loan and have made late payments. Late payment history will generally remain on your file for up to 7 years.
- If you have an overdue installment loan. Accounts considered “not paid” generally remain on your file for up to 7 years.
- If you had an installment loan that went to a collection agency. Accounts that go to collection agencies are generally listed on your file for up to 7 years from the date the account file became past due.
Compare online installment loans
Check the websites of any providers you’re interested in to confirm they operate in your state of residence.
How can an installment loan hurt my credit?
There are a couple ways having an installment loan can hurt your credit:
- It can be proof of missed payments. Missing a payment after your lender’s grace period not only tacks on fees, it also shows future lenders that you’re not always reliable.
- It shows up as a credit inquiry. Every time you apply for credit, be it a loan or credit, it shows up as a credit inquiry on your report and counts for 10% of your credits core.
Even if you don’t get approved. This knocks your credit score down a few points, which you can make up with on-time repayments.
No-credit check installment loans are the quick loans you get from a lender where neither your credit nor title is needed. Instead, he charges you very high in the name of interest and gives you the loan. This is the worst type of loan one can get since the interest increases the amount so much that it becomes almost impossible to pay it back. These are loans which are to be paid back in a fleeting period. A high rate and quick installments will give you the idea of what this loan can do to you.
Check and balance
This loan is generally considered as a trap through which the lenders keep you hooked forever. The installments become impossible to pay with the high-interest rates and when you don’t pay them on time, further fees added to the already-massive amount. This means there is an interest on the loan’s interest and this nesting continues until you are in such a pit hole of debt that there is no coming back. To get out of this, many people go for consolidation debts but that is a story for another time. To cut it short it is better to weigh out everything before jumping to get a no-credit check installment loan.