Deciding on the best installment loans can be a struggle. There are different interest rates, terms, approval requirements and loan amounts to consider. Then, you read about origination fees and may want to throw your laptop out the window.
Put your laptop down and get your zen game on, as there are good deals out there and we’ve done the hard work for you. After researching an array of installment loans online in search of the best installment loan rates, flexible loan terms and low-to-minimal installment loan fees, there are loan options that could make sense for what you need and matches your financial situation.
The best online installment loan rates of 2020
|Lender||APR||Min Loan Amount||Max Loan Amount||Loan Terms||Key Benefit|
|LightStream||3.99%||$5,000||$100,000||2 – 12 years||Low interest rates|
|PersonalLoans.com||5.99%||$1,000||$35,000||3 – 72 months||Flexible loan terms|
|Best Egg||5.99%||$0||$60,000||2 – 25 months||High customer satisfaction|
|Marcus by Goldman Sachs||6.99%||$3,500||$30,000||3 – 6 years||Zero origination fees|
|Upstart||5.69%||$1,000||$50,000||1 – 5 years||Accepts borrowers with little to no credit history|
|Upgrade||6.98%||$1,000||$50,000||3 – 5 years||Offers credit health tools|
|OneMain Financial||18%||$1,500||$20,000||2 – 5 years||Accepts borrowers with poor credit|
What is an installment loan?
Just when you think you have everything in order, life has a tendency to throw expensive curve balls at you like your car breaking down or your water heater going out. Installment loans can be used to cover these types of surprise expenses. Installment loans are a type of personal loan that allows you to borrow a lump sum and pay it back in equal amounts — aka installments — over a set period of time, plus interest.
Installment loans vs lines of credit
Installment loans are different from credit cards in that installment loans involve a lump sum amount that you receive all at once and pay off in monthly installments, which consist of the principal amount and interest.
On the other hand, a line of credit involves an amount that you are approved to borrow from a lender and which you can withdraw at any time. You may pay an annual fee for being able to access the funds, but you only owe interest on amounts that you withdraw and don’t pay back in full within a billing cycle. Once you pay the balance back, the credit line becomes available again.
The general rule of thumb is to use installment loans for large, unavoidable expenditures that require the whole amount at once, and a line of credit to help supplement your income for small amounts that can be repaid quickly. While there are stark differences between lines of credit and installment loans, both can be beneficial for your credit score when used responsibly.
Installment loans vs payday loans
While installment loans involve borrowing a lump sum that is repaid over time, payday loans extend you a loan which must be repaid in a lump sum as soon as possible, typically after your next payday. Many lenders require you to provide a post-dated check or set up an automatic withdrawal.
Payday loans are usually capped at $500, a much smaller loan amount than installment loans offer. They are also easier to get because, in most cases, a credit check isn’t mandatory or bad credit is acceptable. However, the fees on payday loans are much higher than on installment loans, averaging around 400%.
Payday loans should be used as a last resort, as they are notorious for short loan terms and high fees. Many people find themselves unable to pay the balance due on their next pay date, resulting in more fees and a slippery slope into debt. Installment loans allow you to break up your repayments over time, making it easier to stick to the agreement without undue financial stress or pressure.
Secured loans vs unsecured loans
When looking at installment loans, there are two types: secured and unsecured.
An unsecured installment loan is a loan that doesn’t require any collateral. You gain approval based on your income, employment, credit and full financial history. Lenders evaluate the risk you present to decide if you get approved and how favorable your rates and terms are. If you default on the loan, the lender cannot seize any of your assets without a court order.
A secured installment loan is a loan secured by an asset you own that is forfeited in the event you default on the loan. Common secured installment loans are mortgages and car payments. If you default on a secured loan, the lender can seize the asset in order to recoup its loss.
The 7 best installment loans
Lightstream: Lowest interest rates
Lightstream loan rates attempt to be the Fabio of the loan market: as attractive as possible. Interest rates start at 3.99%, loan amounts range from $5,000 to $100,000, and loan terms range from 24 to 144 months.
If you have good credit, at least a 700 credit score, you can puff your chest out and get on the phone with Lightstream right now. Furthermore, if you know someone with good credit who will cosign a loan for you, you may have a chance. Lightstream allows multiple borrowers on one loan, and one of the borrowers can have a lower credit score than the minimum requirement. However, an important thing to note is that youcannot use any of this lender’s loan for post-secondary education or business purposes.
PersonalLoans.com: Most flexible loan terms
PersonalLoans.com is the Pilates of installment loans — flexible. It has interest rates that start at 5.99% and loan amounts that range from $1,000 to $35,000. The loan terms range from three to 72 months, suitable for short- or long-term needs.
Something to bear in mind, however, is that PersonalLoans.com is not an actual lending provider, just a marketplace for loans. You fill in a digital form with your information, and it connects you with a lender that best suits your needs. Also, you need to have a credit score of over 580 to be considered.
Best Egg: Highest customer satisfaction rate
Best Egg gets that the commute to work and other stressors mean that life is already quite tough, so it just wants you to be happy. That focus shows in its impressive 95% customer satisfaction rating. The company’s installment loan rates start at 5.99% for loan amounts between $0 and $60,000, and the loan terms range from 2 to 35 months. Additionally, the lender charges an origination fee between 0.99% and 5.99% of the approved loan amount.
To get approved, your credit rating needs to be above 640. There is also a late fee of $15 and a return fee of $15 if payments are not completed.
Potential customers will need to fill out an online application and once it’s approved, funds can be released in as little as one business day. This means you could potentially pay for that vacation you really need from your annoying commute sooner rather than later.
Marcus by Goldman Sachs: Zero origination fee
Marcus understands that the best things in life are free, so it provides loans with no associated fees. Marcus loan interest rates start at 6.99% for loan amounts between $3,500 and $30,000. The loan terms range from 36 to 72 months.
Marcus also understands that things change in life and sometimes we don’t always have control over them. With that in mind, Marcus provides some payment flexibility by allowing you to change your payment due date and skip a payment. The downside is that it doesn’t provide an option to include a cosigner so you need to ride solo on this loan wagon. Marcus by Goldman Sachs customers also need a good credit rating of at least 660.
Upstart: Best for new creditors with no history
If you don’t have much credit history, Upstart has you covered. It accepts borrowers who are new to credit, such as recent college graduates, as well as those with fair credit scores as low as 620. Upstart loan interest rates start at 5.69% for loan amounts between $1,000 and $5,000, and the loan terms range from 12 to 60 months.
These loans are normally funded within one business day, once approved. However, something to note is, they are not available in West Virginia and Iowa. Upstart also charges an origination fee of between 0.0% and 8.0% and a late payment fee of 5% of a past due amount, or $15, whichever is greater.
Upgrade: Best credit health tools
Upgrade provides installments loans, but also offers credit health tools and hardship plans. The credit health tools help customers understand their credit scores and make customized recommendations tailored to a customer’s unique credit history. Basically, it’s like having a relationship counselor for your finances.
Upgrade’s loan interest rates start at 6.98% for loan amounts between $1,000 and $50,000, and the loan terms range from 36 to 60 months. Moreover, this lender also charges an origination fee of 1.5% to 6% of the loan amount. The good news is, borrowers can get approved with credit scores as low as 600 and can get funded in as little as one day after approval.
OneMain Financial: Best for customers with bad credit rating
Lastly, OneMain Financial understands that the past should stay where it belongs — in the past. It provides loans for customers with credit scores under 650 who may not be able to get approved elsewhere. However, there is a price.
The company’s interest rates are a bit higher, starting at 18% for loan amounts between $1,500 and $20,000. Loan terms range from 24 to 60 months. Additionally, an origination fee will be charged as either a flat fee ($30 to $150) or a percentage of your loan amount (1% to 5%).
Before you get your high-interest-rate protest board out, although the rates seem quite steep, the company charges the competitive interest rates compared to other lenders that issue loans for customers with bad credit. For example, Rise rates start at 50% and Opploans at 99%.
The final word
Overall, Lightstream is our favorite pick. It offers the lowest interest rates and provides flexible loan amounts and terms. Nevertheless, it’s not easy to get approved there. If your credit score is slightly lower than 700 (but above 580), you may be eligible for loans from PersonalLoan.com, which also has favorable interest rates and flexible loan term periods.
If you prioritize TLC from your lending provider, Best Egg might be for you, as it has the highest customer satisfaction rate. Marcus charges a zero origination fee, but Upstart provides loans for those with no credit history whatsoever. If you prefer an added service like credit health tools, Upgrade will be your best option. Finally, if you face serious issues with your credit rating, One Main Financial is willing to forgive your past and help you begin rebuilding your credit.
The best installment loan solution will depend on your unique needs and situation. The good news is, there is a solution for a wide variety of people and scenarios.