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An installment loan is a loan that enables you to borrow typically between $5,000 and $50,000 and pay it back in monthly installment payments. Term lengths range from three to six years in most cases, but there are a few that last 12 years. These types of loans are also called personal loans and are used for expenses like home improvements, buying a car, consolidating your debt from multiple credit cards, or covering medical expenses, to name a few.
Choose carefully when shopping for an installment loan. They can vary widely with their term lengths, fees, and APRs. In fact, if your credit score is in the low 600s and high 500s, your rate could be as high as 30% or more.
We scrutinized 12 installment loan companies to find the best six that we feel comfortable recommending. We looked into each company’s background, rates, fees, and terms, so we can suggest reputable, lower-cost providers. Read about the six best installment loans to see which ones are the best fit for your needs.
Best Overall : Marcus by Goldman Sachs
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Marcus-by-Goldman-Sachs
When it comes to a balance of rates, loan limits, terms, and conditions, Marcus by Goldman Sachs sits above all personal loan competitors.
Wide variety of repayment term options
Lower interest rates than most lenders
No fees
Option to defer a payment
Funding can take five days
Maximum six-year loan terms
Only phone customer support available
With lenient requirements and great terms, including no origination, prepayment, or late fees, Marcus by Goldman Sachs earns our nod as best overall for installment loans. Goldman Sachs is one of the most recognizable names in Wall Street’s investment banking sector. The company started offering consumer banking services under the name of Marcus by Goldman Sachs in 2016 and currently offers several financing products, including personal loans.
To qualify for a loan, applicants need to attain a minimum credit score of only 660 for a loan between $3,500 and $30,000. Marcus’ loans have a fixed interest rate of 6.99% to 19.99% APR that can be reduced by 0.25% if you sign up for auto-pay. There are no signup fees and no prepayment penalties. While there are nine different term options available, (36, 39, 42, 45, 48, 54, 60, 66, or 72 months), applicants with credit scores in the higher range will qualify for the longest term options and lowest rates.
Marcus accepts applications from consumers in all 50 states, plus Washington, D.C., and Puerto Rico. There are age requirements, however. You must be over 18 (19 in Alabama, 21 in Mississippi and Puerto Rico), with a valid U.S. bank account and Social Security or Individual Tax I.D. number.
Users of the Marcus by Goldman Sachs app can track their debt and finances. The app has a 4.9 rating on the App Store and 4.5 on Google Play. Marcus by Goldman Sachs earned five out of five stars from The Motley Fool, and 4.1 stars out of five from Bankrate.
An added benefit of working with Marcus is that after making 12 consecutive regular loan repayments, users can defer one payment, which means extending the loan term by one month.
Read the full Marcus by Goldman Sachs Review.
Best for Long Repayment Terms : LightStream
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LightStream
With terms ranging from two to 12 years for home improvement loans and two to seven years for all other loans, LightStream is our top pick for those who want to enjoy favorable loan terms and longer repayment terms.
Loan terms up to 12 years
No prepayment penalty, origination fee, or late payment fee
Requires a minimum credit score of 660
Funds in your account as soon as one day
The loan must be used for what you selected in the application
The loan can’t be used to fund another LightStream loan or education funding
LightStream has high loan limits to $100,000 that have repayment terms as long as 12 years, winning our best lender with long repayment terms. The company is an online consumer lending division of Truist Bank, one of the leading companies for financial services.
The interest rates provided by LightStream are typically fixed, ranging between 2.49% and 19.99%; if automatic payments are used, they get an additional 0.50% rate reduction. Applicants can get loans between $5,000 and $100,000 with terms ranging between two to 12 years for home improvement loans and two to seven years for all other loans.
One of the most significant upsides is that there are zero prepayment penalties, origination fees, or late payment fees when using LightStream as a lender. However, LightStream requires applicants to be residents of the U.S. and have a minimum credit score of 660. Applicants can apply from all 50 states. The loan must be used toward the purpose you select in the application and can’t be used to fund another LightStream loan or education funding.
Other restrictions include:
- You can’t get a loan if your W2 income comes from the marijuana industry
- No higher education
- Loans only made to individuals, not businesses
- No cash-out refinance purposes
- No loans to buy stocks, bonds, or stock options
- No loan can be used toward retirement, life insurance, or education savings plan
More than 16,000 customers have left 5-star reviews for LightStream. Most users give it a high score for the easy application, fast funding, and affordability but criticize it for the long approval time. LightStream received the highest score in the personal loan segment of the J.D. Power 2020 U.S. Consumer Lending Satisfaction Study of customers’ satisfaction with their lending company.
If you’re unsatisfied with your experience, you can contact LightStream’s customer support to potentially receive a $100 Loan Experience compensation.
Read the full LightStream Personal Loans Review.
Best for Excellent Credit : Best Egg
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Best Egg
If you have an excellent credit score and want to get a personal loan under highly favorable conditions, Best Egg is the company to turn to.
Low loan minimum amount
No prepayment penalties
High satisfaction rates
Low loan maximum amount than some other lenders
Requires a minimum credit score of 700
Minimum income of $100,000
Those with a minimum credit score of 700 and who want a highly rated personal loan provider should definitely consider turning to Best Egg to get the best loan terms and conditions.
Best Egg was founded in 2013 with the goal of helping people pay back their debt quickly through programs that fit their lifestyle.
The loan amounts can range from $2,000 to $35,000, although applicants can be approved for loans up to $50,000. APRs can range between 5.99% to 35.99%, which includes both the interest rate and an origination fee of 0.99% to 6.99% of your loan amount. The origination fee on loans with terms longer than four years will be 4.99% at a minimum. The minimum term is 36 months, and the maximum term is 60 months.
Best Egg loans can be repaid at any time without any type of penalty.
Applicants must have a minimum credit score of 700 and a minimum individual annual income of $100,000 to qualify.
Although the loan minimum is $2,000 for most states, there are some state-specific minimum limitations. Residents of Massachusetts have a minimum loan amount of $6,500, the threshold in New Mexico and Ohio is $5,000, and the minimum in Georgia is $3,000. If you’re applying for a second loan, your total existing loan balance cannot exceed $50,000.
According to reviews left on Trustpilot, Best Egg’s personal loans are rated with 4.7 stars based on over 5,000 reviews. Over 90% of the reviewers rated Best Egg with 5 stars.
Read the full Best Egg Personal Loans Review.
Best for Early Repayment Options : SoFi
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SoFi
While many installment loan programs have strict terms and conditions for early repayments, SoFi has zero penalties or fees for early repayments, while offering higher loan amounts than others for up to seven years.
High loan maximum amount
Zero fees and penalties
Has a mobile app to track and manage your loan
Higher loan minimum amount than some lenders
Requires a minimum credit score of 680
Applicants can get loans up to $100,000 with terms up to seven years without having to pay any type of fees or penalties for early repayments, making SoFi our best choice if early repayment options are important to you.
SoFi was founded by Stanford Business School students in 2011 as a way of connecting recent grads with alumni in their community. While they initially started as a student loan refinancing provider, they quickly expanded their services to a wide array of personal loans.
SoFi customers can get loans with terms ranging between two and seven years. Loan amounts range from $5,000 to $100,000 with an APR of 4.74% to 19.38% depending on the applicant’s credit score. SoFi has zero fees, including no early repayment penalties, origination, or hidden fees.
To be eligible for a SoFi loan, applicants should have a credit score of at least 680 and be a U.S. citizen, permanent resident, or visa holder who is 18 years or older and resides in one of the 29 eligible states. They should also be employed, have sufficient income from other sources, or have an offer of employment to start within the next 90 days.
SoFi has an average score of three stars out of five from customers who wrote a review on ConsumerAffairs.
A few of SoFi’s added perks are a mobile app, career coaching, financial planning, and estate planning.
Read the full SoFi Personal Loans Review.
Best for Bad Credit : Avant
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Avant
Avant approves applicants with credit scores as low as 550, a full 100 points lower than many lenders, making Avant our recommendation for an installment loan if you have bad credit.
Requires a minimum credit score of only 550
Low minimum loan amount
Offers secured loan options
Low maximum loan amount
Higher fees than most lenders
There is no co-sign or joint loan option
Most installment loan providers require a credit score of at least 650, but our choice for candidates with bad credit, Avant, has just a 550 minimum.
Based in Chicago, Illinois, Avant was established in 2012 to offer personal loans and their personal credit card to applicants who either need a loan or want to build their credit.
Applicants are eligible to borrow $2,000 to $35,000 at rates that range from a 9.95% to 35.99% APR, and loan terms of two to five years. Avant charges an origination fee of up to 4.75%, which is not the lowest but is not as high as some other lenders’ origination fees of 10%. Avant charges $25 for late payments, as well as a Dishonored Payment Fee of $15 charged if your monthly payment bounces.
Avant will work with applicants who can offer a vehicle or other property as collateral to get a lower APR or a higher loan amount.
Avant has over 14,500 reviews on Trustpilot, with an average score of 4.7 out of five stars for all their services combined.
Read the full Avant Personal Loans Review.
Best for Debt Consolidation : Discover Personal Loans
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For those who want to minimize loan costs and set up a flexible repayment term, Discover Personal Loans offers the best option for consolidating multiple loans.
Option to customize the loan amount and length
Flexible repayment terms
No fees as long as you pay everything on time
Return loan funds within 30 days and pay no interest
Free Credit Scorecard with your FICO Credit Score
No rate discount for autopay
No co-signed, joint, or secured loan options
Charges late fees
Discover Personal Loans’ debt consolidation program stands out from its peers thanks to its flexible repayment options, customized loan terms, and because the company will pay the borrower’s creditors directly.
Discover was founded in 1985, starting with only Discover cards and then expanding to a whole array of financial products. Today, its name is well-known in the financial world and is relied on by millions of customers.
Your APR will range between 5.99% and 24.99%, with no origination fees and flexible repayment terms of 36, 48, 60, 72, or 84 months. Customers can also decide to repay the loan funds within 30 days without having to pay any penalty or interest. Discover has no geographical restrictions for its installment loans in the U.S. and lends between $2,500 and $35,000 to borrowers with a credit score of 660 or above.
Discover Personal Loans also require you to:
- Be a U.S. citizen or permanent resident
- Be at least 18 years old
- Have a minimum household income of at least $25,000
According to their website, Discover’s Personal Loans have a rating of 4.9-stars based on over 15,500 reviews.
You can apply, check your application, and respond to an invitation entirely online. In addition to this, Discover has a 30-day money-back guarantee through which applicants can return their loans without having to pay any interest or fees.
Read the full Discover Personal Loans Review.
Bottom Line
When shopping for an installment loan, finding the lowest APR is important, but there are other factors to watch for as well. For example, different lenders have different loan minimums and maximums. Make sure your loan request fits into the loan limits.
Look at term length as well. Do you want a longer term that affords you lower payments? Then look for loan programs in the seven- to 12-year range, the longest terms you'll find. Finally, check for signup or origination fees, early payment fees, late charges, and bounce fees. Not all lenders have these fees. In fact, a few on our list do not have any, like Marcus by Goldman Sachs and SoFi.
Compare Providers
| Company | Why We Picked It | Best Features |
|---|---|---|
| Marcus by Goldman Sachs | Best Overall | No fees; Option to defer a payment after 12 on-time payments |
| LightStream | Best for Long Repayment Terms | 12-year installment loans for home improvement; No fees; Possible to fund in one day |
| BestEgg | Best for Excellent Credit | Very high customer reviews |
| SoFi | Best for Early Repayment Options | Loans up to $100,000; Zero fees or penalties |
| Avant | Best for Bad Credit | Requires a minimum credit score of only 550; Has secured loan options |
| Discover Personal Loans | Best for Debt Consolidation | Free Credit Scorecard with your FICO Credit Score; Return loan funds within 30 days and pay no interest; Flexible term options |
Frequently Asked Questions (FAQs)
Does an Installment Loan Hurt Your Credit?
Installment loans do not hurt your credit, as long as you make your monthly payments on time. According to Experian, each loan on your credit report gives you a more robust credit history. Making payments on time will help your credit score because it shows that you can manage debt responsibly. Before you get too excited, however, understand that they will not increase your score instantly, nor by a lot. When a lender pulls your credit report, you will probably see an initial dip in your score by a few points, and the increasing debt-to-income ratio may also drop your score additional points initially. So boosting your score with on-time installment loan payments can take several months.
Which Is Better: A Payday Loan or an Installment Loan?
An installment loan will almost always have better terms for the borrower than a payday loan. Whereas installment loans are paid back over time in smaller monthly payments, payday loans are usually paid back in a single lump-sum payment.
Installment loans also lend bigger sums of money than payday loans, and have lower fees and interest rates. Payday loans should be reserved for last-resort scenarios when you are faced with a short-term cash crunch in between paychecks.
What Happens If You Pay Off an Installment Loan Early?
According to InCharge Debt Solutions, a 501(c)(3) non-profit credit counseling organization and member of the National Foundation for Credit Counseling, the best reason to pay off an installment loan early is to save on interest payments. The longer you carry out your term payments, the more interest you will pay in total over time.
But paying off an installment loan early may not improve your credit score. Credit bureaus prefer to see you have several open, aged accounts, that you pay on time. Paying your loan off early closes that loan on your report. A caveat to this is if your credit score is hurting because you have a high debt-to-income ratio, you may benefit from paying off some of your debts as soon as possible.
Make sure your installment loan does not come with prepayment penalties. This type of fee is designed so that the lender can capture the future interest they will lose if you pay your loan off early.
How We Chose the Best Installment Loans
We investigated 12 installment loan providers and evaluated each based on the lender’s company history and customer reviews to paint a picture for you of its trustworthiness. We dug into the details of their loan terms, including rates, term lengths, and conditions, to better understand their pros and cons. Then, to more fully understand their costs, we found out if they carried origination or signup fees or prepayment penalties. Finally, we outlined how you can qualify for their installment loans, what limitations they may have, and what added perks they offer to complement their loan service.