If you apply for an installment loan and get approved, know that you don’t have to accept the offer. You should keep this in mind as not all lenders will allow you to prequalify without any impact to your credit score. To get an idea of your rates and terms, you’ll need to go through the formal application process. Here’s what you need to do about applying for a loan.
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How to apply for an installment loan
Fortunately, it’s easy to apply for an installment loan from a bank, credit union, or online lender. Depending on the lender, you may be able to prequalify before you officially apply. To do so, you’ll need to provide some basic personal information and state how much you want to borrow.
After you’ve been approved and would like to move forward with an offer, it’ll be time to submit an official application. While every application is different, you’ll likely need to provide the following information:
- Address
- Birth date
- Social Security Number
- Banking details
- Purpose of the loan
You’ll also need to submit several documents. These may include a government-issued ID like a driver’s license or passport, proof of income (such as pay stubs or tax forms), and proof of address like a utility bill.
Pros of installment loans
The greatest benefits of installment loans, include:
- Predictable repayment terms: You’ll know exactly how much your monthly payments will be when you take out an installment loan. It’ll be easy to budget for your loan accordingly.
- Quick funding: While funding time depends on the lender and loan type, you may be able to receive your money the same day you apply, the next business day, or within a few business days.
- Large loan amounts: Installment loans let you borrow large sums of money compared to credit cards and other options. This can be a huge plus if you have a significant expense to cover.
Cons of installment loans
These are the main drawbacks of installment loans.
- Fees: In most cases, you’ll be on the hook for a variety of fees that may increase the overall cost of borrowing. These include origination fees, late fees, and prepayment penalties.
- Use restrictions: Some lenders will restrict what you can do with the loan proceeds. For example, you might not be able to take out a personal loan to pay for educational expenses.
- Can’t receive more funds: Once you use up the funds from an installment loan, you won’t have access to more. You’ll need to apply for and take out a different loan.
Bottom line
An installment loan can make it easier for you to meet financial goals. If you do apply for one, however, don’t feel obligated to accept it. You can always explore other options or pursue them at a later time.
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