If you have less-than-perfect credit and need money for unexpected expenses or to consolidate debt, it can be difficult to secure financing from a traditional lender. What then? Are any options available?

Installment loans designed for people with low or poor credit scores are a way to bridge that gap.

With flexible repayment terms and competitive rates, low-credit installment loans can provide a solution for people facing financial challenges. But, there are a lot of stories out there about people who don’t read the fine print and end up in predatory lending situations, putting them in a deeper hole than when they started. Are these types of loans ever a smart choice?

The answer is yes — but you need to do your homework.

In today’s competitive lending environment, more and more opportunities exist for credit-challenged people. Reputable lenders are out there, delivering just what they offer: Loans to people with low credit scores, the ability to pay unexpected expenses, and a chance to rebuild credit, one payment at a time.

But, as with any financial decision, it’s wise to do some research before you sign on the dotted line. It means comparison shopping, reading that fine print, making sure you can afford the monthly repayment amount and considering the pros and cons.

Pros

Accessibility: Credit score is not a factor for many installment loan providers. They give the folks who actually need money because of financial hardship the ability to access it.

Speed: Many providers will direct deposit the funds into your account shortly after approval.

Flexibility: These loans often offer flexible terms and repayment options tailored to individual financial situations, providing borrowers with the ability to customize their repayment schedules according to their specific needs and capabilities.

Improvement of credit score: Another big plus is the opportunity to improve your credit. Successfully managing and repaying a low credit finance loan can contribute positively to rebuilding your credit score over time. On-time payments are reported to credit bureaus, potentially opening doors to better financial opportunities in the future.

Emergency funding: In situations where individuals with low credit scores face unexpected expenses or emergencies, low credit finance loans can serve as a crucial lifeline, providing quick access to funds without the need for a high credit score.

Diverse loan options: With the increasing demand for low credit finance loans, financial institutions and lenders have diversified their loan offerings, providing borrowers with a range of options to choose from, including secured and unsecured loans, personal loans, payday loans, and installment loans, catering to various financial needs and preferences.

Cons

Higher interest rates: Low credit finance loans typically come with higher interest rates compared to traditional loans. The lenders aren’t checking your credit, so it’s a bigger risk for them. But it can mean a much higher APR, above 36% and even sometimes as high as 200%. Read the fine print carefully and be clear on exactly how much you’re paying.

Risk of predatory lending: Some lenders targeting individuals with low credit scores may engage in predatory lending practices, such as excessive fees, hidden charges, or unfair terms, potentially trapping borrowers in cycles of debt and financial hardship. The bottom line here: Do your research before doing business with any lender.

Limited loan amounts: Due to the higher risk associated with low credit borrowers, lenders may impose lower maximum loan amounts, limiting the funds available to borrowers compared to those with higher credit scores.

Impact on financial health: Taking on additional debt through low credit finance loans without careful consideration of your overall financial situation and repayment ability can exacerbate existing financial challenges, potentially leading to further credit deterioration and financial instability.

Reduced borrowing options: A history of utilizing low credit finance loans may limit future borrowing options, as lenders may view such behavior as indicative of higher credit risk, potentially restricting access to more favorable loan terms and financial products in the future.

Examples of low-credit installment loans

Here are online low-credit-loan options you can check out for yourself:

Heart Paydays — Loan amount: Up to $5,000; Annual percentage rate (APR): Up to 35.99%

Big Buck Loans — Loan amount: Up to $5,000; APR: Up to 35.99%

Viva Payday Loans — Loan amount: Up to $5,000; APR: Up to 35.99%

Green Dollar Loans — Loan amount: Up to $5,000; APR: Up to 35.99%

Low Credit Finance — Loan amount: Up to $50,000; APR: Up to 35.99%

Before taking out any online loan, make sure to read all the information on their website carefully to compare loan terms and conditions, including their interest rates, additional fees and repayment requirements.

Bottom line: With streamlined application processes and quick approvals, these low-credit installment loans can provide a financial lifeline to funds when you need them most. But do your research. By making those payments on time, you’ll help build your credit for a better financial outlook in the long run.