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Loans

Installment loans are helpful when you're buying a home, car or just need quick cash — here are the best ones

CNBC Select ranked the best installment loans for various needs — from mortgages to car loans to debt consolidation.

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An installment loan allows you to borrow a fixed amount and pay it back in regularly scheduled payments — or installments. Installment loans often have lower interest rates than credit cards and their predictable repayment terms can make them easier to budget for. They're also a better alternative to payday loans, which are both extremely risky and costly.

Several types of loans fall under the installment loan category, from personal loans to mortgages to car loans. Here, CNBC Select breaks down the best installment into six categories, so you can choose the best one for your needs. (Read more about our methodology below.)

Best installment loans

Best personal loan

LightStream Personal Loans

  • Annual Percentage Rate (APR)

    7.49% - 25.49%* APR with AutoPay

  • Loan purpose

    Debt consolidation, home improvement, auto financing, medical expenses, and others

  • Loan amounts

    $5,000 to $100,000

  • Terms

    24 to 144 months* dependent on loan purpose

  • Credit needed

    Good

  • Origination fee

    None

  • Early payoff penalty

    None

  • Late fee

    None

Terms apply. *AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Excellent credit required for lowest rate. Rates vary by loan purpose.

Pros

  • Same-day funding available through ACH or wire transfer (conditions apply)
  • Loan amounts up to $100,000
  • No origination fees, no early payoff fees, no late fees
  • LightStream plants a tree for every loan

Cons

  • Requires several years of credit history
  • No option to pay your creditors directly
  • Not available for student loans or business loans
  • No option for pre-approval on website (but pre-qualification is available on some third-party lending platforms)

Who's this for? LightStream is ranked as the best personal loan thanks to its flexibility, quick funding and low interest rates for borrowers with good credit. The lender offers loans for just about any purpose, from debt consolidation to auto financing. Whether you're looking to remodel your kitchen, pay medical bills or get rid of your credit card balances, LightStream can be an excellent choice.

To unlock LightStream's lowest interest rates, you need to sign up for autopay. Otherwise, your APR will be 0.50% higher. The best rates are also usually reserved for borrowers with excellent credit.

Another feature that makes LightStream a great option for personal loans is the lack of fees, including origination fees, administration fees and early payoff fees. Terms range from 24 to 144 months, which is the longest-term option among the lenders on our list.

Finally, LightStream can fund your loan as soon as the same day, provided your application is complete and approved on a business day and you electronically sign your loan agreement and verify your direct deposit banking account information by 2:30 p.m. ET.

Best personal loan for people with bad or no credit

Upstart Personal Loans

  • Annual Percentage Rate (APR)

    6.4% - 35.99%

  • Loan purpose

    Debt consolidation, credit card refinancing, wedding, moving or medical

  • Loan amounts

    $1,000 to $50,000

  • Terms

    36 and 60 months

  • Credit needed

    Credit score of 300 on at least one credit report (but will accept applicants whose credit history is so insufficient they don't have a credit score)

  • Origination fee

    0% to 12% of the target amount

  • Early payoff penalty

    None

  • Late fee

    The greater of 5% of last amount due or $15, whichever is greater

Terms apply.

Pros

  • Open to borrowers with fair credit (minimum 300 score)
  • Will accept applicants who have insufficient credit history and don't have a credit score
  • No early payoff fees
  • 99% of personal loan funds are sent the next business day after completing required paperwork before 5 p.m. Monday through Friday

Cons

  • High late fees
  • Origination fee of 0% to 10% of the target amount (automatically withheld from the loan before it's delivered to you)
  • $10 fee to request paper copies of loan agreement (no fee for eSigned virtual copies)
  • Must have a Social Security number

Who's this for? Upstart is a good personal loan option if you have no credit history or your credit score is low. When determining your eligibility, the company looks at factors beyond your credit, such as education, employment and work experience.

You can prequalify and check the APR you're likely to get before applying with a soft credit check with no impact on your credit. Once you apply, however, the lender will perform a hard inquiry.

You can borrow between $1,000 and $50,000 and take between three and five years to pay off the loan. Upstart can fund your loan as soon as the next business day if you accept it before 5 p.m. EST Monday through Friday. 

The tradeoff is potentially high fees. Upstart charges up to 12% in origination fees and of 5% of the last amount due or $15, whichever is greater. Still, if your credit leaves you with few financing choices, Upstart might be your best bet.

Best car loan

PenFed Auto Loans

  • Annual Percentage Rate (APR)

    Starting at 5.24%

  • Loan purpose

    New vehicles, used vehicles, refinancing

  • Loan amounts

    Starting at $500

  • Terms

    36 to 84 months

  • Credit needed

    Not specified

  • Early payoff penalty

    None

  • Late fee

    20% of the overdue amount, up to $25

Terms apply.

Pros

  • Loan amounts start at $500
  • No early payoff fees
  • Prequalification available
  • Cash incentives through car-buying service
  • Co-borrowers allowed

Cons

  • Credit union membership required
  • Late payments subject to fees

Who's this for? PenFed is our top pick for auto loans, whether you're buying a new or used car or looking to refinance an existing car loan. PenFed boasts low interest rates and offers flexibility in term lengths and loan amounts.

You don't need to be a member to apply but to receive the funds, you'll have to sign up for a membership. Anyone can become a member. The only requirements are to open a PenFed savings/share account with a $5 deposit and maintain a $5 account balance so that your membership remains active.

The credit union provides a prequalification tool that lets you see estimated terms with a soft credit check. Further, if you're using PenFed's car buying service, powered by TrueCar, you can score members-only cash-back incentives and special loan discounts. That said, you can also go with any other car dealer of your choice.

If you're looking to refinance your auto loan, PenFed allows you to apply online — and the process is simple and transparent. Note that the credit union doesn't refinance its own loans.

Best mortgage loan

Rocket Mortgage

  • Annual Percentage Rate (APR)

    Apply online for personalized rates

  • Types of loans

    Conventional loans, FHA loans, VA loans and Jumbo loans

  • Terms

    8 – 29 years, including 15-year and 30-year terms

  • Credit needed

    Typically requires a 620 credit score but will consider applicants with a 580 credit score as long as other eligibility criteria are met

  • Minimum down payment

    3.5% if moving forward with an FHA loan

Terms apply.

Pros

  • Can use the loan to buy or refinance a single-family home, second home or investment property, or condo
  • Can get pre-qualified in minutes
  • Rocket Mortgage app for easy access to your account

Cons

  • Runs a hard inquiry in order to provide a personalized interest rate, which means your credit score may take a small hit
  • Doesn't offer USDA loans, HELOCs, construction loans, or mortgages for mobile homes
  • Doesn't manage accounts for jumbo loans after closing

Who's this for? Rocket Mortgage is one of our top choices for mortgages as it works with applicants with lower credit scores, making buying a home accessible to more borrowers. While most mortgage lenders require a minimum credit score of 620, Rocket Mortgage accepts homebuyers with scores as low as 580.

Whether you're buying a single-family home, an investment property or a condo, Rocket Mortgage is worth considering. The lender also advertises several mortgage loan options, including conventional loans, FHA loans, VA loans and jumbo loans. Unfortunately, Rocket Mortgage currently doesn't offer USDA loans, HELOCs, construction loans or mortgages for mobile homes.

It only takes a few minutes to prequalify with Rocket Mortgage without hurting your credit. However, remember that preapproval is essential to the homebuying process since it gives you a more accurate estimate of how much you can afford and on what terms. Plus, it shows sellers and listing agents that you're a serious buyer. To preapprove your loan, the lender will need to run a hard credit check which can impact your credit.

Best credit card debt consolidation loan

SoFi Personal Loans

  • Annual Percentage Rate (APR)

    8.99% - 29.99% when you sign up for autopay

  • Loan purpose

    Debt consolidation/refinancing, home improvement, relocation assistance or medical expenses

  • Loan amounts

    $5,000 to $100,000

  • Terms

    24 to 84 months

  • Credit needed

    Good to excellent

  • Origination fee

    No fees required

  • Early payoff penalty

    None

  • Late fee

    None

Terms apply.

Pros

  • No origination fees required, no early payoff fees, no late fees
  • Unemployment protection if you lose your job
  • DACA recipients can apply with a creditworthy co-borrower who is a U.S. citizen/permanent resident by calling 877-936-2269
  • Can have more than one SoFi loan at a time (state-permitting) 
  • May accept offer of employment (to start within the next 90 days) as proof of income
  • Co-applicants may apply

Cons

  • Applicants who are U.S. visa holders must have more than two years remaining on visa to be eligible
  • No co-signers allowed (co-applicants only)

Fixed rates from 8.99% APR to 29.99% APR reflect the 0.25% autopay interest rate discount and a 0.25% direct deposit interest rate discount. SoFi rate ranges are current as of 02/06/2024 and are subject to change without notice. The average of SoFi Personal Loans funded in 2022 was around $30K. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed and will depend on the term you select, evaluation of your creditworthiness, income, and a variety of other factors.

Who's this for? If your goal is to consolidate credit card debt, SoFi can be a solid choice. SoFi ranked as the best personal loan provider for credit card refinancing thanks to its affordable interest rates, flexible terms and lack of fees.

With SoFi, you can borrow as little as $5,000 or as much as $100,000 and take from 24 months to 84 months to repay the loan. The lender doesn't charge origination fees, late fees or early payment penalty fees. SoFi's interest rates are also on the affordable side when compared to other personal loan lenders. To add to that, SoFi will give you a rate discount if you opt for DirectPay, allowing the lender to pay your credit card issuers directly. You can view your estimated APR with a soft credit check.

To qualify for a loan from SoFi, you need at least good credit. If your credit requires some work, it may be a good idea to look into debt consolidation loans for bad credit.

Best student loan refinancing

Discover Student Loan Refinancing

  • Cost

    No origination fees or application fees

  • Eligible loans

    Federal and private graduate and undergraduate loans

  • Loan types

    Variable and fixed rates

  • Variable rates (APR)

    5.99% – 9.99% APR

  • Fixed rates (APR)

    4.99% – 9.99% APR

  • Loan terms

    10 or 20 years

  • Loan amounts

    A minimum of $5,000 and a maximum of $150,000; higher limits may apply to certain fields of study

  • Minimum credit score

    Not disclosed

  • Minimum income

    Not disclosed

  • Allow for a co-signer

    Yes

Terms apply.

Pros

  • No application fees, origination fees, or late fees
  • 0.25% interest rate reduction if you enroll in automatic payments
  • No prepayment penalties
  • Doesn't require borrowers to have graduated
  • Deferment options available if you go back to school, are on active military duty, attend a health professions residency program, or are part of certain public service organizations

Cons

  • No option to have co-signers released from the loan after a certain number of qualifying payments has been reached
  • Residency loans and other post-graduate loans are not eligible
  • Loans taken out while you were enrolled in school less than half-time do not qualify

Who's this for? Discover is ideal for borrowers looking to refinance their student loans. The lender might allow you to consolidate up to the whole amount of your student debt, depending on your credit profile. This can be especially helpful if you have a large student loan balance other lenders may not be able to cover.

Discover works with both federal and private student loans and allows you to choose from variable and fixed interest rates. You'll also get a 0.25% rate reduction if you enroll in automatic payments. Additionally, the lender can help you save on fees as Discover charges no application, origination or late fees.

Note that not all types of student loans are eligible for refinancing through Discover. Examples of ineligible loans include post-graduate loans, loans for K-12 education and others.

Compare offers to find the best loan

FAQs

How do installment loans work?

When you take out an installment loan, you're getting a lump sum of money you're agreeing to repay on specific terms. Most of the time, you get a fixed interest rate, meaning it doesn't change or fluctuate over the life of the loan.

To repay the loan, you make monthly payments, which consist of a principal portion that applies to the loan's balance and an interest portion. With a fixed interest rate, your monthly payment remains consistent but your interest-to-principal ratio changes with each payment. At first, you pay more toward interest, but as your remaining balance goes down, so does the interest you owe. Since the interest is calculated based on the remainder of your balance, if you pay more toward the principal, you can save on interest and pay off the debt sooner. On the other hand, if your payment is late, you may accrue additional interest.

What happens if you pay off an installment loan early?

Paying off your installment loan early may be an excellent idea as this will help you save on interest and get rid of the debt faster. However, before you decide to do so, check if your lender charges prepayment penalties.

A prepayment penalty is a fee some lenders charge if you pay off part or all of your loan ahead of schedule. In this case, you may have to pay a percentage of your loan balance, the amount of interest your lender will be missing out on or a fixed fee.

If your lender charges this kind of fee, do the math before paying off your loan early to determine whether it's worth it. And if you're currently shopping for a loan, it may be wise to look for a lender that doesn't charge any early payoff fees.

How do you get an installment loan with bad credit?

Bad credit can significantly decrease your options when you need financing. But whatever kind of installment loan you're looking for, it's possible to find a lender working with borrowers in your type of credit situation. That said, you're likely to face higher interest rates than those with higher credit scores.

CNBC Select created rankings for various types of installment loans for bad credit, including:

Do installment loans build credit?

Installment loans can help you build credit if you consistently make payments on time. Payment history is the most influential credit factor, so if you add on-time loan payments to your credit report, your credit scores may benefit. The reverse is also true: if you're late on your loan payments, your credit will most likely take a hit.

Of course, this doesn't mean you should apply for an installment loan just for the sake of your credit — unless you're applying for a credit builder loan. A credit builder loan is designed specifically to help borrowers build credit. Instead of providing the funds upfront, the lender puts the money in a savings account you can't access until you repay the loan in full.

Bottom line

Whether you're looking to buy a car or a house, remodel your kitchen or get rid of credit card debt, you can find an installment loan that suits your needs. Plus, as you're making on-time payments, an installment loan can help you build credit. Just like with any type of debt, make sure you approach it responsibly and strategically, shop around for the right lender and understand the terms.

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Our methodology

To compile a list of the best installment loans, CNBC Select analyzed dozens of loans offered by online and brick-and-mortar banks, including large credit unions, virtual marketplaces and other lenders that come with no origination or signup fees, fixed-rate APRs and flexible loan amounts and terms to suit an array of financing needs.

When narrowing down and ranking the best installment loans, we focused on the following features:

  • Fixed-rate APR: Variable rates can go up and down over the lifetime of your loan. With a fixed rate APR, you lock in an interest rate for the duration of the loan's term, which means your monthly payment won't vary, making your budget easier to plan.
  • Flexible minimum and maximum loan amounts/terms: Each lender provides a variety of financing options that you can customize based on your monthly budget and how long you need to pay back your loan.
  • No early payoff penalties: The lenders on our list do not charge borrowers for paying off loans early.
  • Streamlined application process: We considered whether lenders offered quick approval decisions and a fast online application process. 
  • Customer support: Every loan on our list provides customer service available via telephone, email or secure online messaging. We also opted for lenders with an online resource hub or advice center to help you educate yourself about the personal loan process and your finances.
  • Fees: We evaluate fees in addition to other features when determining the overall offer from each lender. Though some lenders on this list do not charge these fees, we have noted any instances where a lender does charge such fees. 
  • Other factors: Each type of installment loan has unique characteristics we also include in our evaluations. For example, for mortgage lenders, we look at closing timelines and types of mortgage loans offered. For auto loan lenders, we consider whether the lender offers the option to add a co-signer or co-borrower.

The rates and fee structures advertised for car loans are subject to fluctuate in accordance with the Fed rate. However, once you accept your loan agreement, a fixed-rate APR will guarantee your interest rate and monthly payment will remain consistent throughout the entire term of the loan. Your APR, monthly payment and loan amount depend on your credit history and creditworthiness. To take out a loan, many lenders will conduct a hard credit inquiry and request a full application, which could require proof of income, identity verification, proof of address and more.

Catch up on CNBC Select's in-depth coverage of personal financetech and toolswellness and more, and follow us on FacebookInstagram and Twitter to stay up to date.

*Your LightStream loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Excellent credit is required to qualify for lowest rates. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 7.99% APR with a term of 3 years would result in 36 monthly payments of $313.32

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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