Bad credit and borrowing money are like oil and water — they don’t mix. That’s why financial advisors will tell you to focus on raising your credit score before you take out a loan.
There’s just one problem with following this tip. Life doesn’t always play by these rules. If an unexpected expense comes your way suddenly, you may need to borrow money before you get a chance to raise your credit.
You can try applying for a personal loan anyways, but you’ll likely face rejection. So, what’s your next step?
If you’ve been denied a loan due to your bad credit, you may have better luck with a second chance installment loan.
What is a Second Chance Installment Loan?
Think of a second chance installment loan as a failsafe when you don’t have any other options. You may apply for a second chance loan when you’ve been denied funding in the past, or you know your credit score will result in a rejection.
If you’ve ever wished you could have a do-over when an application goes wrong, these kinds of installment loans are your next best option. You may get a second chance at borrowing money, provided you meet the requirements of these installment loans.
What Are the Requirements?
Eligibility requirements will vary from lender to lender, but as a whole, they serve the same purpose. These requirements evaluate your creditworthiness.
Creditworthiness is a lender’s assessment of how likely you’ll repay what you owe. The more creditworthy you are, the more likely you’ll pay your bills on time.
Lenders that reject you because of bad credit value your credit score as one of the biggest factors in determining your creditworthiness.
Second chance installment loan lenders, on the other hand, may look at a broader range of data when deciding to grant you funds.
In addition to your score, they may look at the following information to assess your creditworthiness:
- Debt to Income Ratio
- Employment History
- Income and Payment History
- State of Residence
These stats may give them a more holistic view of your financial situation than just a credit report. It gives insights into your current cash flow, not just your past borrowing habits.
How Do They Work?
With “installment loan” in the name, it may come as no surprise that it performs much like any other installment loan. If approved, you’ll receive your funds in one lump sum and a repayment schedule outlining when you have to pay back what you owe, plus rates and fees.
There are plenty of different kinds of loans that fit under this umbrella term — from mortgages and student loans to title loans and cash advances. Second chance installment loans are designed specifically for emergencies. As an emergency backup, a second chance loan should only be a temporary stopgap while you work on your credit.
Unlike cash advances or direct lender payday loans, second chance installment loans don’t require repayment in one lump sum. You’ll make multiple payments spread out over weeks, months, or even years depending on your lender.
If at first you don’t succeed, try again with second chance installment loans. These emergency loans may be a safety net — whether you’ve been denied once before or simply believe your credit will cause problems in the future.