An installment loan can help you in a variety of situations, whether you’re looking to consolidate debt or need help funding a home repair or car purchase. But if you have bad credit, you might wonder if such a borrowing opportunity is available to you.

Luckily, there are installment loans for bad credit available, and the best installment loans for bad credit allow those with lower scores to qualify. Just keep in mind these loans generally have higher interest rates than loans extended to those with good credit.

Credible evaluated the best personal loan lenders for bad credit based on factors such as customer experience, minimum fixed rate, maximum loan amount, funding time, loan terms, fees, discounts, and whether cosigners are accepted. Credible’s team of experts gathered information from each lender’s website, customer service department, directly from our partners, and via email support. Each data point was verified by a third party to make sure it was accurate and up to date.

Installment loans for bad credit work much the same as any other installment loan, except they are designed for borrowers with lower credit scores. This may mean that a lender has less strict eligibility criteria, takes additional financial factors into consideration, or allows applicants to have a cosigner.

With an installment loan, you typically receive a lump sum upfront and then pay it back in set amounts, with interest, over a defined period of time. 

For bad-credit loans, however, loan amounts offered may be lower due to the higher perceived risk for the lender. Additionally, these loans tend to have higher interest rates compared to those for individuals with good credit — for instance, some lenders may charge annual percentage rates (APRs) as high as 35.99%.

Meanwhile, someone with excellent credit may qualify for one of the best personal loans with an APR as low as 4.60%, which can make a major difference in the overall cost of borrowing. Here’s an example: If a bad-credit borrower and a good-credit borrower both took out a $5,000 installment loan with a two-year term, the bad-credit borrower with a 35.99% APR would pay $1,841.95 more in interest over the life of the loan than the good-credit borrower with a 4.60% APR.

Installment loans encompass a number of different loan types. These include:

Improving your credit score prior to applying for an installment loan can allow you to qualify for better loan terms — namely, a lower interest rate. Here are some steps you can take to improve your credit:

Installment loans for bad credit are designed for those who have poor credit — generally in the range of 580 to 600 or lower — or a limited credit history. You may consider an installment loan for bad credit to consolidate and pay off credit card debt, cover emergency needs like an unexpected medical bill or car repair, or help rebuild credit history through responsible repayment of the installment loan.

Installment loans for bad credit can help you secure needed funds, but they’re not for everyone. Here are the pros and cons. 

The exact eligibility criteria for an installment loan for bad credit will vary depending on the lender, but in general, they will consider factors such as your:

If you’re struggling to qualify, you may also increase your odds by applying with a cosigner, which is someone who agrees to share responsibility with you for repaying the loan. If you fail to make any payments, the cosigner is obligated to assume responsibility. Just keep in mind that late or missed payments could affect their credit score in addition to your own.

If you’re applying for an installment loan for bad credit, you’ll generally need to go through the following process:

If you have bad credit, an installment loan isn’t your only option to borrow funds. Alternatives you might look into include:

Installment loans can be used for a wide range of purposes, including consolidating debt, covering unexpected expenses, or financing a large purchase like a home or car. Check with your lender to see if there are any restrictions on the use of loan proceeds.

It’s possible to get installment loans through a variety of financial institutions, including banks, credit unions, and online lenders. Many of the best installment loans for bad credit tend to be offered by online lenders that lend to those with poor credit or thin credit histories.

Installment loans can affect your credit score both positively and negatively. When you initially apply for the loan, you’ll generally see a temporary dip in your score due to the hard inquiry conducted by the lender. 

If an installment loan boosts your existing credit mix, and/or you’re timely with your payments, then that could positively affect your credit. Missed or late payments, however, can drag down your score.

While payday loans are technically a type of installment loan, they come with far steeper interest rates (frequently stretching into the triple digits) and the repayment term is very short — often, you’ll have to repay the full amount as soon as your next payday, hence the name. Installment loans, on the other hand, are repaid in installments over a period of time. And while interest rates on installment loans may be higher for borrowers with bad credit, they’re nowhere near as high as on payday loans. 

Interest rates for bad-credit installment loans tend to range on the higher side, up to 35.99% or potentially even higher. However, the exact interest rate you receive will depend on a variety of factors as well as what a specific lender takes into consideration when reviewing your loan application.