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All You Need to Know About Alternative Installment Loans

It is always nice to have options.

The simple idea of having more than one choice gives you a sense of freedom that is so satisfying to your human nature. This is why loan companies have ensured that they have different kinds of loans to offer. Alternative installment loans have become one such popular choice.

As the name suggests, alternative installment loans offer borrowers loans that they have to pay in equal installments over an agreed period of time. This may sound like personal loans, but there is a major difference. These are the best alternative to accessing a loan that people with bad credit scores can get. Under normal circumstances, if you have a bad credit score, say below 550, you are not capable of accessing a loan, and if you do, you end up having to pay higher interests than another person with a good credit score would. Alternative installment loans enable you to access a loan fast, and from reliable sources, even with a bad credit score.

How Alternative Installments Loans Work

Alternative installments loans are available from both banks and non-institutionalized loan facilities. As such, all you need to do is apply for one either on the premises or on the online platforms available. Since you do not need to use your credit score as proof of credibility, what most companies require as far as proof of credibility is proof of payment of utility bills, proof of income, a valid checking account, and a valid ID to prove your identity and that you are of legal borrowing age. These are also the documents demanded while applying for the loan. Some may, however, also ask for your social security details.

When you get an alternative installment loan, your loan, plus the interest it gains, you have to pay back in equal installments over a specified and agreed-upon period of time. Each time you pay an installment, your loan decreases. Simple examples of installment loans include mortgage loans, student loans, and car loans.

Pros and Cons To Alternative Installment Loans

For starters, there is no collateral that is demanded. As mentioned above, as long as you can prove that you have a steady source of income and verify your identity, you can get an alternative installment loan very easily. It also follows that whether or not you are a bad borrower or have a bad credit score, alternative installment loans are easily available. Some companies actually deposit the money into your account the same day you apply, especially when you apply online. Another major advantage is the fact that with alternative installment loans, the purpose of the loan is not a priority. With normal personal loans for instance, the purpose of the loan can be used as a reason for denying you the loan. With alternative bad credit installment loans, most lenders seem not to care what you will do with the money, as long as you pay the agreed installments at the agreed time.

One of the disadvantages of taking an alternative installment loan is the fact that it may have no positive effect on your credit score. Since some of the lenders that offer these loans are not mainstream, they may not record the existence of your loan to Credit Reporting Bureaus (CRBs). As such, no matter how good a borrower you become, your credit score remains bad. On the flip side, if indeed you are recorded with Credit Reporting Bureaus and you fail to honor some of the installments, you could easily hurt your already shaky credit reputation.

Another major disadvantage is the interest rate offered. Most places that offer alternative installment loans know that you do not have a different choice. As such, you are offered a little money at a very high interest rate, little to the tune of $2,500. You may not even notice or feel the pinch of higher interest because you are given a long time to pay, but at the end of the day, you might end up paying up to 36% interest. Most lenders that offer these loans have very low limits. You will find that most only offer up to $20,000 as the upper limit.

Finally, alternative installment loans allow you to refinance mid payment. This means that if somewhere along the process, you have the need to get more money, you can refinance your existing loan and get a higher loan. Of course, there are terms and conditions of this depending on the state you are in. One such term is that some companies demand that before you refinance, you must first pay off the current finance charges.

How To Get An Alternative Installment Loan

There are a number of lenders that offer alternative installment loans currently. You have the choice of banks, credit unions or any number of lenders that are listed online. The best choice, however, is using a loan company that you have used before. This gives you an edge as you are able to predict their terms and rates. It also enables you to easily access all the information that you could need prior to signing up for one.  Alternatively, if you have no experience with loan taking, do some research and find out which lenders ask the lowest interest rates. Then dig more on any other details that may be hidden in the terms and conditions prior to applying for a loan. As part of your research, get your annual credit report just to ensure that, indeed, your best option is to take an alternative installment loan.


It is good to know that having a bad credit score isn’t the end of the world. You are still capable of applying and even accessing a loan that gives you a number of advantages. However, just as with every other form of loan, you should ensure that you pay the installments on time. Since this may not be reflected in your credit ratings because some lenders may not record it, it will work as a path maker for financial discipline. When you finally build back your credit score, you will be able to honor payments in time and keep a clean record from here on.

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