Installment loans with no prepayment penalties

While you may need to explain how you plan to use the money on your application, there generally isn't a hard and fast rule about how you use your personal loan.

Like a car loan or a student loan, you'll receive a lump sum of money that you need to repay in monthly installments over a fixed period of time known as the loan's term along with interest charges.

The repayment period for a personal loan can be anywhere from two to five years, but some are as long as seven years. Car loans are generally six years long on average, while student loans typically have a year timeline, but it could take longer if you're on an income-driven repayment plan. Personal loans are different from credit cards because there is no set timeframe for paying back your credit card debt, though, the quicker you pay off the balance the less you'll accrue in interest charges.

Ideally, you pay off your balance on time each month and never pay interest. Credit cards also have a credit limit, which is usually much smaller compared to the average personal loan amount that borrowers request. While the interest rate on personal loans is generally much lower than that of credit cards, it really depends on how much money you request and your credit score.

Keep in mind that the higher your credit score, the more favorable your terms can be; a good credit score will help you get approved for a lower interest rate or a longer loan term or both.

Sometimes, personal loans come with a few additional fees, including an origination fee and a prepayment penalty. It's the early pay-off fee you need to be wary of. It is possible to pay off your personal loan early, but you may not want to.

Making an extra payment each month or putting some, or all, of a cash windfall, toward your loans, could help you shave a few months off your repayment period. However, some lenders may charge a prepayment penalty fee for paying the loan off early.

The prepayment penalty might be calculated as a percentage of your loan balance, or as an amount that reflects how much the lender would lose in interest if you repay the balance before the end of the loan term.

The calculation method will vary from lender to lender, but any prepayment penalties would be outlined in your loan agreement.

There are a number of lenders that don't charge a prepayment penalty. SoFi , for example, won't charge you a prepayment fee for paying off the loan early and there's also no late payment fees.

If you'd prefer looking into a peer-to-peer lender, LendingClub is another option for loans with no prepayment fee. Typically, you'll need good to excellent credit to qualify for the best personal loans with the best terms.

When you pay down your credit card balance, you lower the amount of credit card debt you have in relation to your total credit limit. So shouldn't the same be true when paying off your personal loan? According to Experian , personal loans don't operate the same way because they are installment debt.

Credit card debt, on the other hand, is revolving debt , which means there's no set repayment period and you can borrow more money up to your credit limit as you make payments.

Installment debt is a form of credit that requires you to repay the amount in regular, equal amounts within a fixed period of time.

When you're done repaying the loan, the account is closed. When you take on a personal loan, you add to the number of open accounts on your credit report.

But when you pay off an installment loan, it appears as a closed account on your credit report. Closed accounts aren't weighted as heavily as open accounts when calculating your FICO score, so once you pay off your personal loan, you'll have fewer open accounts on your credit report.

If you pay off the personal loan earlier than your loan term, your credit report will reflect a shorter account lifetime. Generally, the longer your credit history , the better your credit score will be. Therefore, if you pay off a personal loan early, you could bring down your average credit history length and your credit score.

How much of a change in your credit score will depend on your overall credit profile. Having a low credit score can put you at a disadvantage making it difficult to get an apartment, good financial products, even a job.

However, practicing good financial habits , like making consistent, on-time payments and avoiding applying for too many new lines of credit at the same time, can help boost your score. See if you're pre-approved for a personal loan offer.

Personal loans can be a convenient and affordable way to cover a large expense and improve your credit history when used responsibly.

You must also have a bank account and an email address. Like other loan companies on this list, Avant is not a direct lender. As an aggregator, the company will try to match you with appropriate lenders. While this means you might be inundated with calls and emails from various lenders, you may find yourself with more choices.

Avant offers unsecured personal loans for eligible borrowers. Available terms are between 12 and 60 months, which is fairly standard in the industry. However, the lender charges substantial origination fees and interest rates Repayment term options vary between 36 and 60 months.

With a range between 5. To be eligible for an installment loan through Universal Credit, you need to be at least 18 years old or 19 in Alabama. You also need to be either a U. citizen, permanent resident, or have a valid visa. Other requirements include a bank account and an email address.

Universal Credit does not publicly share its minimum credit score. OneMain Financial is a lender that offers installment loans and credit cards to eligible borrowers. Borrowers can select a , , , or month loan term.

OneMain Financial charges an origination fee that may be either a flat amount or a percentage of the loan. Residents of the following states are not eligible for OneMain Financial loans:. Before taking out an installment loan, consult with an expert like a financial planner or qualified credit counselor who can go over your other options.

If you have emergency expenses, need to make timely home repairs or want to consolidate your debt, an installment loan may be a viable solution.

Using an installment loan for unnecessary or discretionary expenses may not be a wise choice. Installment loans often have high interest rates and fees , especially if you have bad credit. To pick the best installment loan from the right lender, figure out what monthly payment you can afford.

Then, look for the lender that offers the lowest APR with that monthly payment. The APR includes all non-negotiable fees, as well as the interest rate.

There are plenty of installment loan options for borrowers with bad credit. Before picking a lender from our curated list, get preapproved to see what kind of APR you qualify for. Gather at least three quotes so you can compare your available options and never take on more than you can afford.

Qualifying for an installment loan depends on your credit score, income, job history and other factors. People with good credit and a steady income will often find it easier to get favorable loan terms than those with a recent bankruptcy or lengthy unemployment stint on their record, for instance.

If you want to improve your chances of being approved, try boosting your credit score as much as possible. Go through your credit report and make sure there are no mistakes that are knocking your score down. There are many lenders that will provide loans to borrowers with bad credit, including the five companies mentioned above.

Lenders have their own standards and make decisions on a case-by-case basis. Even if one lender rejects your application, another may still approve you. Our team put together a comprehensive point rating system to evaluate personal loan companies.

We gathered data points from 28 of the most prominent lenders in the US and analyzed disclosures, licensing documents, sample loan agreements, marketing materials and websites. Our rating system takes into account four broad categories.

Our top-rated lenders may not be the best fit for all borrowers. To learn more, read our full personal loans methodology. MarketWatch Guides Personal Loans Best Installment Loans for Bad Credit in February Loan Amount.

Updated: January 24, Written by: Zina Kumok Written by: Zina Kumok Contributing Writer Zina Kumok has been a freelance personal finance writer for almost 10 years. Edited by: Kelly Larson Edited by: Kelly Larson Senior Editor Kelly is an editorial leader and collaborator with over 13 years of experience creating and optimizing data-driven, reader-focused digital content.

Related Resources Best Bad Credit Loans Best Debt Consolidation Loans How To Get a Personal Loan With Bad Credit Best Fast Personal Loans Best Low-Interest Personal Loans. Tips for Choosing the Right Installment Loan The Bottom Line FAQs Methodology.

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