Problem: You need money to cover an unexpected emergency auto repair.
Solution: Apply for an online installment loan.
When speaking broadly, borrowing money naturally fits into your finances if you’re facing an unexpected emergency without savings. But once you zoom in on the issue, this simple formula is missing a few steps.
This isn’t math class. You don’t have to show your work before you can apply for online installment loans, but it’s a good idea. Working through these steps can help you make an informed decision when choosing a lender or financial product.
Here are the things you should have worked out before you hit send on your application.
Know Your Credit Score
Your credit score determines what sort of rates and terms you qualify for, and even if you can apply with some financial institutions. Knowing this will help you narrow down your search, saving you some time and frustration.
Many banks and online direct lenders use your credit score to determine how much risk they take on by granting you funds. In their eyes, a lower score poses a greater danger of delinquency, so you’ll pay higher interest if you have bad credit.
Some banks might even deny your application outright if your score is low enough. Luckily, there are alternatives in installment loans for bad credit should this ever happen.
In a state like Texas, which has one of the lowest average credit scores in the U.S., you might have a greater chance of having bad credit than most. The average credit score in Texas is 656, which means you might face some challenges when it comes to borrowing. Knowing your score can help you avoid options that you don’t qualify for.
Find out the Rates and Terms
The rates and terms of your installment loan let you know how much it will cost to borrow money with your credit score. There’s no way you can tell if an installment loan is affordable without these details, so you’ll want to be thorough when researching any option.
Before you borrow, you’ll want to find out the answers to the following questions:
- What is the interest rate? Is it fixed or variable?
- What is the APR?
- Are there additional fees or conditions?
- What is your repayment schedule?
- How big are your monthly installments?
Zero in on Your Location
Many of the rates and terms you face are set by your state of residence. That’s because there are state-level lending laws that determine how financial institutions can lend money. They join broader federal laws that protect you against usury.
Finding a lender that’s licensed in your state guarantees they follow these laws. It also helps your qualification, as only lenders licensed in your state can issue loans online.
That means, if you live in Texas but try to borrow from a lender only licensed in Alabama, you’ll be denied even if you have perfect credit. To improve your chances of approval, you should specify your online search for fast installment loans in Texas.
Even fully licensed lenders can have different eligibility criteria. Some online direct lenders might apply higher fees and expect their payments on a tight timeline, while others may offer lower rates and longer terms.
You won’t know until you shop around, comparing the rates and terms of at least five lenders. This gives you a good idea of what’s available with your financial background. But more importantly, you’ll be able to pick the best of the bunch to ensure you’re getting the most affordable deal.
Draw up a Budget
Even the best deal in the world may not work for you if it doesn’t fit your budget. That’s why you should see how your installment loan payments fit into this spending plan before you say “yes” to a loan.
Don’t panic if your loan doesn’t fit perfectly into your budget right away. It’s normal to sacrifice unnecessary expenses to free up cash for your repayments. If you have expendable cash tied up with splurges, you can easily cut out takeout and entertainment costs to cover your loan.
But if you can’t afford to repay your installment loan online even after you strip your budget bare, it’s time to move onto the next offer.
Check Your Answers Against This Rubric
An installment loan is supposed to help you solve a financial emergency, not cause another one. To make sure you’re getting a bona fide solution, remember to work through the above exercises. They’ll help you make a more informed decision when it comes to borrowing. Better yet, you’ll be on route to finding the best possible option for your needs today.