An installment loan is an excellent way to buy a car or a home without crushing your finances. But with bad credit or no credit, getting a loan can seem like a dream that’s beyond your reach.
Thankfully, you can take steps to establish credit and improve your score with a MoneyLion Credit Builder Loan. These installment loans require no hard credit checks and they’re made available for anyone, even if you have a low credit score.
What is an installment loan?
A loan that you repay in regularly scheduled payments over time is known as an installment loan. Each monthly payment includes a portion of principal and interest.
Common installment loans include:
- Car loans
- Student loans
- Personal loans
There are plenty of benefits to taking out an installment loan.
- Installment loans give you the ability to purchase big-ticket items, like cars and homes, without the large cash outlay. This doesn’t tie up cash that you may need to pay for your everyday living expenses, such as food and utilities.
- You may be able to pay the loan off early by making extra payments.
- With a consistent monthly payment, it’s easier to incorporate the installments into your household budget.
While there are good reasons to take out an installment loan, they do have their own list of drawbacks.
- If you fall behind on your monthly payments, it can damage your credit.
- Between the interest rate and the fees, borrowing money can be costly.
- If you lose your job or your economic situation changes, being locked into an installment loan can be financially challenging.
How do installment loans work?
Before you can get an installment loan, you must qualify with a lender. You can borrow money through a bank, credit union, or a finance company. When seeking an installment loan, you can expect the following.
- There will be an application. You must apply for an installment loan with the lender. Applications will vary based on the lender, but they typically include questions about your personal information, employment history, and monthly income.
- The lender will run a credit check. A lender will run a credit check to determine your creditworthiness.
- There are options. With your completed application and credit check in hand, the lender can discuss the lending options that may be available to you. This discussion will inform you of the amount you can borrow, the interest rate on your total purchase, the number of monthly payments necessary to pay off the installments. If you have a low credit score or minimal credit history, a lender may ask that you have someone with a stronger credit history co-sign the loan. They may also ask you to pay more money to reduce the total loan.
Once you receive your loan, you will start making your monthly payments after 30 days. Your monthly payment is determined by:
- The amount borrowed
- The number of months that the lender has agreed to let you repay the loan
- The interest rate that the lender is charging you
As you pay back the installment loan, your monthly payments will include a combination of principal and interest. The principal portion of your payment reduces the total amount that you owe, whereas interest is the cost of borrowing money.
Over time, your payments will include less interest and more principal. This happens because your total loan balance drops every time you make a payment. As a result, more of your monthly payment will go towards what you owe.
Who qualifies for an installment loan?
Common qualifications for an installment loan include:
- A good credit score. You are more likely to be approved for an installment loan with a higher credit score.
- Reliable income. Lenders want to be sure that you’ll pay them back. They will verify how much money you make, as well as how long you have been working.
- A low debt-to-income ratio. A lender may compare the total amount of money you owe to how much you make. The lower your debt-to-income ratio, the less risky your loan will be to a lender.
- Long-term credit history. Lenders look at how you’ve handled credit in the past when deciding whether or not to loan you money. If you have recurring late payments or limited credit history, they may be uncomfortable letting you borrow money from them.
Even with a minimal credit history or a poor credit score, you may still qualify for an installment loan. But it will cost you. If you can get an installment loan, it’s important to remember that lenders typically charge higher interest rates when you have a lower score or a limited credit history. Plus, you may have to put more money down or spread your loan payments over a longer period of time so that you can afford them.
Bad credit loan with MoneyLion
Take steps to improve your score or build your credit history through the Credit Builder Plus membership offered by MoneyLion. When you become a Credit Builder Plus member, you may be eligible for an installment loan up to $1,000.
Whether you have bad credit or no credit at all, you can qualify for a Credit Builder Plus loan with easy 12-month repayment terms. Monthly loan payments are automatically deducted from your checking account, which helps establish a positive payment history.
Since this program helps improve your credit score or establish credit history, a portion of the loan is put aside into a Credit Reserve account in your name. This helps you save money over time.
Once your loan is paid back, the money in your Credit Reserve account is transferred into your bank account. Members who participate in this program report a bump of up to 60 points in their credit scores within a few months of starting the program.
How to apply for a MoneyLion Credit Builder Loan
You can sign up for a Credit Builder Membership and apply for a loan of up to $1,000 by following just a few steps.
Step 1: Create a MoneyLion account
Download the MoneyLion app and create your account.
Step 2: Apply for a Credit Builder Plus membership.
Through the MoneyLion app, you can apply for a Credit Builder Plus membership. However, you must meet a few requirements to become a Credit Builder Plus member and apply for a loan.
- Eligibility requirements include:
- Be at least 18 years old.
- Proof of U.S. citizenship or permanent residency.
- Have a social security number.
- Have a bank account, debit card, or prepaid card for your loan payments.
- Soft credit check: MoneyLion conducts a soft credit check. You don’t need to have good credit or history to qualify. This is not a hard credit check, meaning it does not impact your credit score.
- Link your checking account: MoneyLion scans your primary checking account to determine if you are eligible. Just link your primary checking account to the MoneyLion app. Your checking account must meet the following:
- Your account must be in good standing and show a consistent stream of income from paychecks or benefit payments.
- The account must be open for at least 60 days.
- The checking account is actively used and has a positive balance.
If your checking account hasn’t been open long enough or doesn’t reflect enough activity, you won’t be accepted. However, you can always reapply when you can meet these requirements.
Step 3: Credit reserve account
If you qualify for a Credit Builder Plus loan, a portion of the proceeds is deposited into your checking account. The remaining amount of your loan is deposited into a Credit Reserve account set up in your name.
The money in this account earns interest over time, which can be transferred into your MoneyLion investment account to help you build wealth. Once you have successfully paid off your loan, whatever remains in your Credit Reserve account is deposited into your account.
Alternatives to installment loans
Bad scores or a lack of credit history can hold you back from getting an installment loan. When you qualify for a Credit Builder Loan, you’re able to put yourself on track to improving your credit score.
Without hard credit checks that ding your credit score, you may qualify for an installment loan of up to $1,000 even if you have bad credit or none at all. The Credit Builder Plus membership is designed to help you make timely payments while saving money at the same time.
Beyond improving your credit score, there are other steps you can take to better your financial situation. For starters, you can build wealth when you open a MoneyLion Investment account. With our personalized portfolio approach, you’ll invest in stocks and bonds according to your financial goals.
Automated investing places funds into your account and invests your money according to your directions. Even the interest you earn on your Credit Reserve account builds wealth when deposited into your investment account.