While all personal loans are in fact installment loans (like car loans and mortgages) there is one difference. Which would be the interest rates, amounts available. It’s these details that will determine what type of loan you might qualify for. Both are a type of unsecured loan that involves regular monthly payments over set repayment terms.
If you were hoping to borrow $25,000 and your credit score is 650, you probably would not qualify for a personal loan. You would be more eligible for an installment loan, but may find that most lenders would not allow an amount this high without a credit score of 720 or higher. Leaving you the choice of taking a lower amount now, or work on improving your score so you might be able to qualify for a personal loan later.
Installment Loans vs Personal Loans
Personal Loans – these can allow you to borrow up to $50,000, or sometimes more, but are reserved for people with good to excellent credit. They often come with preferred terms and better interest rates, but not available to everyone. Many personal loans are available for up to five years in many instances.
Installment Loans – this type of loan is more suited to those with a fair to good credit score. The amounts available also tend to be smaller, with interest rates that are higher than most personal loans. The amount available is often from $2,500 to $25,000, depending on the lender. Most installment loans are available for one to three years on average.
How do Personal Loans Work?
After submitting an online application, it is reviewed for underwriting and typically involves a soft credit check to determine the risk as a borrower. If the application is pre-approved the customer would be redirected to instant bank verification (IBV). If the customer is fully approved, they are sent to an e-sign page. Once digital signature is completed the customer would wait for the funds to be deposited into their bank account. Many lenders deposit the loans by e-transfer and some will wire the funds. If your funds are sent by e transfer you can receive the money in minutes at times. Applying on a weekday during business hours can also help. Those thinking to apply for a personal loan should have good to excellent credit to qualify.
How do Installment Loans Work?
Just like with personal loans, this option is mainly different due to interest rates, terms, and amount available. An installment loan is most suited for someone with fair to good credit.
If you’re not a qualified borrower for personal loans, comparing installment loans can still provide the funds needed. For those with a less than stellar credit score there is also the option of bad credit loans to consider, which come with higher interest rates.
RELATED: How to Get a Loan With Bad Credit
Online Loan Requirements
Applying for loans online is a fast way to get the funds you need. It wasn’t long ago that banks and credit unions were your only option, but those days have passed. Now, you can choose from a variety of lenders and find options as good or better than what the banks may offer.
Most online loan options have similar requirements that include the following:
- To be of legal age (18 or older in most provinces)
- To be a Canadian citizen and able to provide government issued ID
- To be employed with a regular income (some lenders will consider those on benefits)
Applying for online loans compared to banks is often faster and easier to qualify. Most banks require higher credit scores as well. If you qualify for a loan with good terms and rates, this can be a great way to consolidate your debt when you have outstanding loans of higher rates to pay off and help you save on interest. These types of loans are also suitable for a variety of reasons around the home like a big purchase, repairs, renovations and more.
Are Payday Loans the Same?
Payday loans are not like an installment loan because the full amount is due your next payday. Where an installment loan is made up of multiple payments (or installments) that would be paid over the term that was agreed to for repayment.
Comparisons and More: