Getting an Installment Loan
Whether you’re financing a large purchase or need cash for unexpected expenses, here are the best installment loans.
An unexpected or large purchase could require you to borrow money. When considering options, an installment loan is a good one to consider. With them, you’ll pay your loan off in fixed installments, meaning you’ll pay the same amount monthly. Additionally, they offer lower interest rates, so you’ll pay less than you would with a credit card.
The best installment loans of 2020
- LightStream – Best for low-interest rates
- SoFi – Best for member perks
- Marcus – Best for no fees
- Best Egg – Best for high-income earners
- Upstart – Best for average credit
- Upgrade – Best for credit health tools
- OneMain Financial – Best for same-day funding
- Earnest – Best for flexible terms
LightStream – Best for low-interest rates
If you have great credit then LightStream is the best option for you to consider. It offers interest rates as low as 3.49% APR with automatic payment, giving you access to the cash you need without a high total loan cost.
What’s more, it has some of the most flexibility for lenders. You could qualify to borrow anywhere from $5,000 to $100,000. This makes LightStream perfect for a variety of purposes such as financing a wedding, paying for medical debt, paying off student loans and more.
In addition, repayment terms are between two and 12 years, so you have more flexibility when paying off the loan. It’s important to note the longer the repayment term you choose, the higher your interest rate will be. With this in mind, it’s important to strike the right balance to maximize the benefit of their low-interest rates while paying off the debt.
SoFi – Best for member benefits
SoFi is a lender that cares about its members’ financial decisions. When you borrow with SoFi, you become a member — and membership comes with its share of rewards.
Most importantly, SoFi provides financial planning from accredited counselors. This allows you to speak with a finance expert, who can help you plan for the future, maximize saving money and more. This benefit on its own makes SoFi a good choice, especially if you want a fresh perspective on your finances.
In addition to counseling, members receive cash bonuses when they refer their friends and family to SoFi. As a member, you could also receive a discount on any future loans. And if you or a loved one are planning to go back to college, there’s a helpful resource guide that breaks down how to pay for your education.
Last, but certainly not least, SoFi has unemployment protection where if you lose your job and your loan is in good standing, you can get forbearance in three-month increments. SoFi will even provide job-assistance to help you find a new job.
Marcus – Best for no fees
When using an installment loan, one of the things to watch out for is fees. Some lenders charge origination fees, which is a small percentage of the loan amount. However, even a 3% fee on a $10,000 loan is an additional $300 you have to pay.
Marcus eliminated these fees. When you receive a loan with Marcus, you won’t have to worry about paying an origination fee and it won’t penalize you for paying off your loan balance early. Combined, this could save you hundreds of dollars compared to lenders who do employ loan origination fees.
Furthermore, Marcus makes it simple and risk-free to see if you qualify. Simply, visit its website and fill out the prequalification form. If you qualify, you’ll learn your terms and how much you can borrow without a hard inquiry reported on your credit histories.
Best Egg – Best for high-income earners
Best Egg is a good option if you earn more money and can afford to pay off a loan quickly. Unlike other lenders who allow borrowers to take up to seven years to repay the loan, BestEgg’s loan repayment window is much tighter, giving borrowers three to five years for repayment.
In many regards, this is a good differentiation for the lender. The quicker you pay off the balance, the less you’ll pay in interest charges. And on that front, Best Egg has competitive rates starting as low as 5.99% APR.
With these factors in mind, if you earn more money and have great credit, then Best Egg will be a good fit for you. You receive excellent rates and a shorter repayment term, which still gives you flexibility without the higher total loan cost.
Upstart – Best for average credit
Upstart works differently than other lenders in that it considers a total picture of your finances. Many lenders will examine your credit and income then make a determination based on this information. However, with Upstart, it also takes into account your job history, your area of study and education. A minimum credit score of 620 is needed to be eligible for an Upstart loan, which is much less stringent than other top installment loan lenders.
Keep in mind that Upstart is a peer-to-peer lending institution that allows investors to help fund the money needed to create borrowers’ loans.
Upgrade – Best for credit health tools
Upgrade offers you a look into how much you could qualify for without a hard inquiry on your credit histories. How this works is you visit Upgrade’s website and fill out the form to see if you qualify for a loan.
From there, it’ll do a soft pull on your TransUnion credit history to verify your information. If you receive approval, you’ll know your loan terms and borrowing amount instantly.
Upgrade also gives access to credit health monitoring tools for free so that borrowers can improve and establish better credit scores for themselves. With trend-tracking and weekly credit updates, it’s easier for borrowers to increase their credit scores and understand their histories.
OneMain Financial – Best for same-day funding
Sometimes unexpected expenses arise and you need cash quickly to pay for them. With some lenders, you could wait a day or two to receive funding after approval, but OneMain Financial does things a little differently.
You can apply for a personal loan through its website. And if you need the cash the same day, you can visit one of its locations to verify your identity, income, and any other information they require. From there, OneMain Financial will go over your options and you could leave one of their branches with a check that same day.
OoneMain a good option if you need a car repaired quickly or money for other emergency expenses. The key is to have everything you need to verify such as a copy of your government I.D. and pay stub to expedite the process.
Earnest – Best for flexible terms
Whether you want to consolidate your high-interest credit card debt into a lower rate payment, pay off medical bills or finance a wedding, Earnest offers the flexibility to do so. There’s a wide range of borrowing limits from $5,000 to $75,000, making it a smart choice for a wide variety of purposes.
On top of that, Earnest offers flexible repayment terms from three to five years. If you’re looking to borrow and pay the loan off quickly then you can do so. At the same, it also has up to five years for those who need a little longer.
Overall, Earnest gives borrowers the flexibility needed to create personal loans that are best suited for them. The only drawback to keep in mind is the lender does take between five and 10 business days to make a decision when you apply, so if you need cash quickly then it’s best to go with another option.
Compare the best installment loans for 2020
|Lender||Loan Amount||APR||Terms||Key Benefit|
|LightStream||$5,000 – $100,000||3.49% – 19.99%||2 – 12 years||Great interest rates|
|SoFi||$5,000-$100,000||5.99% – 19.96%||2 – 7 years||Unemployment protection and member perks|
|Marcus||$3,500-$40,000||6.99%-19.99%||3 – 6 years||No fees|
|BestEgg||$2,000-$50,000||5.99%-29.99%||3 – 5 years||Low interest rates|
|Upstart||$5,000 – $30,000||6.18% – 35.99%||3 – 5 years||Only 620 credit score requirement|
|Upgrade||$1,000-$35,000||6.99%-29.99%||3 – 5 years||Free credit health tracking tools|
|OneMain Financial||$1,500-$20,000||18%-35.99%||2 – 5 years||Same-day funding|
|Earnest||$5,000-$75,000||4.99%-17.24%||3 – 5 years||Mobile app account management|
What is an installment loan?
An installment loan is where you borrow a specific amount of money and then pay it back in monthly installments at a fixed interest rate and payment. Installment loans typically have the same monthly payment throughout the term of the loan and a very clear, specific payoff date.
Installment loans vs other loan types
Installment loans vs lines of credit
Installment loans give borrowers one lump sum of cash needed for a purpose, like buying a car or funding an emergency medical bill. On the other hand, lines of credit are like credit cards. There’s a maximum draw limit that borrowers can use, and they must pay back any of the cash that they draw from the account, plus interest. At the end of the draw period, whatever cash that isn’t used doesn’t need to be repaid or have interest charges against it.
Installment loans vs payday loans
Installment loans offer flexibility in that you normally have between two to five years to repay the balance borrowers — sometimes up to seven years. Payday loans are a predatory lending practice that have interest rates of up to 400% and extremely short repayment terms, usually a couple weeks to a month. The high interest rates and short payment terms tend to lead to a cycle of borrowing debt that is extremely difficult to resolve, making payday loans a last-resort option for emergency funding.
Secured loans vs unsecured loans
Secured loans require some form of collateral to back a borrower’s promise to repay the loan. Two very common types of secured loans are mortgages and auto loans, both use the house or car as collateral — if the borrower can’t repay the loan, the lender can seize the house or car as a form of repayment.
Unsecured loans don’t require collateral, like personal loans or student loans. If a borrower can’t repay the loan, usually some legal action is taken to recoup the funds, and it counts against the borrower’s credit scores as a delinquent account.