Are you in a financial pinch but worried that poor credit or using an online bank like Chime will prevent you from getting approved for an installment loan? We’ve all been there! Needing extra funds only to get denied because of a low credit score or a lack of brick-and-mortar banking is frustrating, to say the least. But don’t lose hope! There are still options out there to get the financing you need, even if you have credit challenges.
Getting an installment loan with bad credit or through an online bank may seem daunting, but with the right approach, information, and lender, it is possible. This guide will provide tips and tricks to improve your chances, along with the best types of lenders to consider when your credit is less-than-perfect.
The Struggle is Real – Challenges of Securing Loans with Low Scores
Unfortunately, many traditional banks and lenders make it difficult for borrowers with low credit scores or non-traditional banking situations to get approved for installment loans. Here are some of the common obstacles you may face:
- Minimum credit scores. Most banks and credit unions require credit scores in the good to excellent range just to qualify for personal loans. Applicants with scores below 600 will have a hard time finding options.
- Limited financing sources. When your credit is bad, fewer reputable lenders are willing to work with you. The options out there might charge very high-interest rates or fees.
- Unfamiliarity with fintech. Many lenders don’t understand or accept newer online banking technologies like Chime. The lack of traditional routing numbers can deter them from approving loans.
- Assumption of high risk. From a lender’s perspective, low credit scores or the use of digital banking may signal you are a high-risk borrower who may default on the loan.
- Rejection letters are piling up. Each loan application you submit that gets denied makes subsequent approvals even harder, due to the additional hard inquiries on your credit report.
While the traditional banking system can seem rigged against borrowers with less-than-ideal financial profiles, that does not mean you’re completely out of options. You just have to know where to look and how to improve your chances.
Types of Lenders Worth Exploring When Your Credit is Not the Best
Certain lenders are more likely to work with applicants who have low credit scores or use online banking tools like Chime. Here are a few to explore:
Online Installment Lenders
Many online and peer-to-peer lending companies specialize in serving borrowers with bad credit. They use more flexible approval criteria instead of relying solely on FICO scores. Some even specifically accommodate applicants with no credit history.
- LendingClub
- Prosper
- Upstart
- BestEgg
Credit Unions and Community Banks
Smaller regional banks and credit unions tend to be more accommodating of non-traditional situations. They take a more personalized approach to reviewing applications. Credit unions, as member-owned non-profits, can offer better rates too.
- Local credit unions
- Community banks
Peer-to-Peer (P2P) Networks
P2P sites like LendingClub connect borrowers directly with individual investors. This access to more people can increase your chances of getting approved by a single institution. The investors individually set their own lending criteria.
- Lending Club
- Prosper
- Upstart
The key is casting a wide net with multiple lender submissions to expand your possibilities. Leverage technology like multi-lender marketplaces to save time.
Tips to Strengthen Your Installment Loan Application
Even with the right type of lender, approval is never guaranteed with challenged credit or banking. Implementing strategies to improve your loan appeal can help overcome obstacles.
Boost Your Credit Score
While time-consuming, boosting your credit score, even by a small amount, can significantly impact your loan chances. Strategies like correcting errors on your report, lowering credit utilization ratios, or becoming an authorized user on someone else’s account can all help raise your score.
- Obtain free credit reports from AnnualCreditReport.com to check for mistakes. Dispute any errors with the credit bureaus.
- Pay down balances on revolving credit accounts to get your utilization ratio below 30%. This signals responsible credit use.
- Become an authorized user on a family member’s or friend’s credit card. Their good history can help improve your score.
Provide Proof of Sufficient Income
Lenders want to see consistent income sufficient to make the required installment payments. Submitting pay stubs, tax returns, and bank statements can give them confidence in your ability to repay. Highlight multiple income streams if you have them.
Consider Adding a Cosigner
Asking a cosigner with better credit to join your application gives it an automatic boost. Their solid financial profile provides assurance that payments will be made even if you run into hardship. Just be sure they understand the implications if you default.
Shop Around Extensively
Applying to multiple lenders, even if some reject you, can eventually lead to approval. The more nets you cast, the better your odds. It may take persistence, but accessible installment loans are out there!
Step-by-Step Guide to the Installment Loan Process
When you’re finally ready to apply, follow these steps to get through the process smoothly:
Prequalify with Lenders
Submitting prequalification forms enables you to compare options without formally applying or harming your credit score. Once pre-approved, you can select the best lending offer.
Gather The Necessary Information
To complete full applications, have personal and financial details on hand like:
- Contact info (name, DOB, SSN, address)
- Employment and income verification
- Bank account and routing details
Confirm Chime Account Acceptance
Before applying, call or chat with lenders to ensure they work with Chime accounts and can process payments to/from them. Provide your account and routing number.
Read the Fine Print
Scrutinize the full terms and conditions before signing anything. Calculate the total costs of the loan, including origination fees, interest charges, and any prepayment penalties.
Only Borrow What You Need
Avoid the temptation to max out your approved borrowing limit. Borrow conservatively based on your budget and what you can realistically repay on schedule each month.
Wrapping Up: You Can Do This!
As you can see, accessing installment loans through online lenders, community partners, peer-to-peer platforms, and more is possible even if your credit is less-than-stellar. While it may take effort and diligence to find the right loan product, options do exist if you have a plan. Stay determined! With persistence and the above tips, you can get approved for the financing you need. Here are a few parting thoughts:
- Be patient, and don’t let rejections get you down.
- Leverage loan comparison sites to save time shopping around.
- Pay off any new loans responsibly to start rebuilding your credit history.
- Maintain hope – your perfect installment loan match is out there!
Best of luck on your search for financing. With the right approach, you can access installment loans despite having low credit scores or relying on non-traditional banking methods. Stay positive and proactive, and those needed funds will be in your hands in no time. You’ve got this!
Frequently Asked Questions (FAQs) About Installment Loans
Q: What are installment loans?
A: Installment loans are loans that are repaid over time through scheduled payments. Unlike payday loans, installment loans have longer repayment terms that allow you to pay back the loan in portions over several months or years.
Q: Do installment loans require a credit check?
A: Most installment lenders will run a soft credit check to determine your eligibility and interest rate. This will not negatively impact your credit score. However, some lenders may offer no credit check installment loans.
Q: What types of lenders offer installment loans?
A: Installment loans are offered by banks, credit unions, online lenders, and even some payday lenders. Look for an established lender that reports loan payment information to the credit bureaus to help build your credit history.
Q: Can I get an installment loan if I have bad credit?
A: Yes, many lenders offer installment loans for bad credit borrowers. Interest rates may be higher, but making on-time payments can improve your credit over time. Look for lenders that do not charge exorbitant interest rates or fees.
Q: Are there installment loans that accept Chime accounts?
A: Some online lenders like Credit Loan, MoneyMutual, and BadCreditLoans may offer installment loans that accept direct deposit into Chime accounts. Check lender requirements carefully regarding account types.
