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Explaining Instalment Loans What are Instalment Loans?
Have you ever considered an instalment loan? They can provide an excellent financial reprieve for a borrower who is struggling to make ends meet or who has an expense coming up that they need to cover. However, do you know enough about them to be able to commit to this financing solution? Keep reading to find out all about the terms of this type of lending.
What are Instalment Loans?
Instalment loans, or as they are also referred to, Installment loans, as you might have guessed by the name, are loans you can repay in instalments. What that means is that you can borrow an amount of money and make a payment plan with the lender where you agree on repaying the loan in a fixed number of payments, usually of a fixed value, over a certain amount of time.
For example, let's say you will be paying £200 every month for 12 months. You will continue to pay these instalments on the dates agreed upon until you pay off the entire amount you've borrowed, as well as any amount of interest your loan has incurred. The longer it takes to pay off the loan, the more you will be paying in total as interest.
Always shop around for your loan, even if you believe that your current lender is offering you a good deal for your loyalty, it always pays to shop around as some companies offer their best deals to brand new customers.
How do they work?
Instalment loans work like any other loan, and in fact, are the typical type of loan you will find offered by banks or high street lending companies. An instalment loan is a loan that is repaid in a scheduled set of repayments usually each month for a certain period of time, until both the loan and it's interest has been paid back.
Applying for instalment loans is simple and doesn't require much effort; simply fill in the form online, if you're applying at home, on your computer, or go into any lender on the high street and follow their application process. Many lenders will be able to tell you at least whether or not you are pre-approved almost instantly, or within 10 minutes.
Always ensure that you check your credit score before you apply for any type of loan. That way you'll be able to determine if you are likely to get accepted or not. It's also important to see if there's anything false or missing from your report, such as unrecognised applications or missing payments, as this will impact your score negatively. So, it is crucial to check and contest any information that is incorrect.
How much can you borrow?
Regarding amounts, how much you can get will, of course, vary significantly from lender to lender and are dependent on the lender itself, as well as your needs, expectations, and financial situation. A good credit score and financial track record will enable you to borrow a higher amount, while a poor credit score, unemployment, or even self-employment can all be deterrents. Some places only offer up to £3000; others go up to £15,000 - make sure to shop around first and see what different lenders can offer you and at what cost.
How long do you have to repay?
Like the loan amounts, the repayment periods will differ. A small unsecured loan of £500 may be repaid in two months, for example, while higher amounts (think several thousand) will, understandably, be repaid over a more extended period, of 12 to 36 months. Like the amount you can borrow, your credit score can affect the length of your loan. A poor credit rating can limit your repayment period, which will result in higher instalments to pay, and almost certainly, a higher interest rate. Secured loans typically come with longer repayment terms because of the high amount, but also because the borrower provides collateral for securing the loan.
Always know how much you can afford to borrow. You can do this by budgeting and looking at your expenses or alternatively by looking at a loan calculator which can help you to determine the total amount and repayments that you can afford. No reliable lender should pressure you into borrowing more than you can afford, so it's important to know your limits.
Can instalment loans be paid off early?
When picking out a lender, be sure to choose one that gives you the option of repaying the loan early with minimal hassle. Sometimes, it happens that you get an unexpected amount of money from somewhere and are able to repay the loan early. Not only does that reduce your debt anxiety and eliminates the risk of becoming unable to pay later, but it can also reduce the amount you owe, as well, because you're not paying the extra interest. Be aware, however, that a lot of places have a one-time charge for paying early; it's usually equivalent to a percentage of the interest rate.
Getting an loan in instalments How to Obtain an Instalment Loan
If you're interested in the instalment loan application process and loan terms, then carry on reading. In this section we'll provide all the information you need to secure yourself a great instalment loan at a fantastic rate.
How Can I Get an Instalment Loan?
One of the significant advantages of instalment loans is the fact that they are reasonably easily form of credit to get which is readily accessible to people in all kinds of different financial situations. Let's see what you need to do in order to get an instalment loan. Show More »
Figure out how much you need
The very first step, before applying, is to determine how much money you want or need to borrow. That is because you will need to state this fact in your application. Instalment loans range from small sums to around £5,000 to £10,000, depending on lenders. The average instalment loan is around £1000, so if your sum is within the vicinity of that, then you should be good to go.
You then need to apply, you can do this in person, on the high street, or you can do it the easy way: online! Nowadays, most people search and apply for loans online, because it's a lot quicker and easier than applying over the phone or in person. All you have to do is fill out the form they provide, and you should even be able to find out whether or not you are approved within minutes, or even instantly. Once you're pre-approved, you just need to provide any necessary documentation, and you're all set.
Now, the minimal requirements to be eligible for this type of loan are not too demanding to meet, which is why they're such a popular option. You will need to be over 18 years of age, a resident of the UK and have a bank account in your name in order to have your loan considered. Approval will also depend on your credit score, and most lending companies will perform a credit check, an ID check, an employment check and an affordability check. They just want to make sure you're a responsible borrower and that you will be financially responsible.
Stay on top of your repayment schedule
Once you get your money, you can spend it however you intend to, but you should always keep in mind how you intend to repay. Typically, you will start repaying you loan back immediately, in regular, weekly or monthly instalments, so the best course of action is to set up a budget over the next period so that you can set money aside for repayments.
Can I get a loan with bad credit? Instalment Loans and Bad Credit
Loans in instalments are accessible to pretty much anyone, regardless of financial situation or social status. While it is easier for some to get approved than others, everyone should be able to get one. Limitations will come up in a few cases, however, because of things like severely poor credit scores, low income, or an uncertain employment situation.
Can I get an instalment loan with bad credit?
Another massive benefit with these loans is that can be repaid in instalments is that they are accessible to people from both ends of the credit score spectrum. If you have been struggling with bad credit, you surely know how frustrating it is to be limited in terms of amount, to have shorter repayment terms, a very high-interest rate, or not be granted a loan at all.
Fortunately, there are options like instalment loans with no credit check, which offer an opportunity for a loan without even considering your credit rating. Instead, they are more based on income. Then, of course, there are loans for bad credit, which means you can get them even if your rating is poor. Both options have their advantages and disadvantages, and it is up to you to decide which one fits your situation best.
Be aware of representative APR's, as they are only offered to around 66% of their customers, so while you are still likely to get that rate if you have bad credit you can expect to pay more APR. Keep this in mind to avoid any nasty surprises in the future.
How can I improve my credit score?
It's good to know that bad credit is not the end of the world. However, even though it is still possible to have access to loans with a poor credit rating, you should definitely do your best to improve your score. Here are some of the best things you can do to help out your credit score. Show More »
Pay off any outstanding debt
The first thing to keep in mind is that you need to pay off any debt you may have. Yes, that includes old phone bills you never bothered to cover, any debt that went to collections, or loans you've all but defaulted on. Cleaning up your record clean is a great place to start when attempting to improve your credit score.
Reduce the number of credit cards
We all have multiple credit cards and store cards and whatnot, but first you don't need them, and secondly, they can severely damage your credit. Why? Because more credit cards translate to more opportunities to create debt that you will never repay. Did you know that it takes the average person 26 years to pay their credit card debt, just by making minimum payments? The Money Charity has the statistics on that.
Make payments on time
You've probably heard it said it quite a few times, but it bears repeating: it's crucial that you pay your bills on time. That includes everything, from everyday household bills, like rent or tax, to loan instalments. The easiest way to make sure you stay on track and don't forget or accidentally miss a payment is to set up direct debits. Bonus - your bank might even offer you some perks for that.
Is an instalment loan an excellent way to improve credit?
An aspect that people are often confused about is the relationship between loans and improving credit ratings. Can instalment loans improve credit ratings? Can going into debt help increase your score, instead of hurting it? As a matter of fact, yes, it can. In fact, did you know that many people use loans as an ingenious means of improving their credit score? You see when you pay a loan off in an exemplary way (diligently, on time, without delays or skipped payments) you demonstrate financial responsibility. You've taken out a loan, paid it off, and no issues were created. That counts as a point in your favour. It can be a very strategic move, and as long as you know, you can pay it off, there is no reason why you shouldn't be able to get an instalment loan to help your credit.
Don't apply for too many loans at one time. Instead, do your research and apply for a loan that you believe is both a good deal and that you are able to meet the criteria for. That way you'll be likely to get your offer accepted. However, if you apply for multiple loans at the same time, then this will leave a 'footprint' on your credit score which will show up when potential lenders look at your credit score. These multiple applications in a short space of time may make you appear desperate or in financial difficulties, which are warnings to lenders.
An instalment loan can negatively impact your rating if you don't do a good job of keeping up with payments and generally staying on top of it. You see, your score is affected both positively and negatively by your financial actions and decisions. If you default on a loan, you suffer the consequences of bad credit. Same with late repayments or having more credit cards that you can count. On the other side, however, there are the behaviours that can help, including loans. Show More »
If you get instalment loans that you know you can easily, consistently, and reliably pay off, you are demonstrating financial responsibility, which will be reflected positively in your credit rating. That is why this is a clever way to manipulate your score. You can do the math and get a relatively small loan, knowing that you will be able to afford to pay it back quite easily and won't have problems. That way, you ensure that you have some extra money to play with, as well as a better score.
Another thing you should look out for is rejection. Do not apply to loans if you are not reasonably satisfied you will get approved, as rejection will impact your rating negatively. Use a soft search tool to get an idea where you stand before sending in applications. « Show Less
If there's anything in the loan terms that you do not understand then do not agree to it. Research any phrases or industry-based jargon that you do not understand, this will ensure that you understand everything regarding your loan terms.
All in all, instalment loans are a more helpful borrowing option that you probably thought previously. Not only can they be an excellent solution for any financing problem, and they can help improve a poor rating. Of course, not everyone will want this kind of loan, and you may be looking at alternatives. However, regardless of whether you are searching for other options, instalment loans with no credit check can always be a good back up option.
Why is your credit score so important?
Let's start with the basics and explain some things about credit ratings. Your credit score is a numeric reflection of your financial activity over the course of your life. You get points added for being responsible and paying your bills on time, and you have points deducted for being careless and failing to keep up with the repayments. The problem is that everyone will want to take a look at this score in order to be able to assess what kind of borrower you are. Unfortunately, no lender has the ability to predict whether you will pay your loan back or not, no matter how trustworthy you seem or how good your intentions are.
That is why it is essential to keep a good track record and do whatever is within your power to ensure that you do not to slip up, so your credit rating can be the best it can be. Moreover, don't worry - even if your credit is weak, that can always be rectified by actively making an effort to improve your rating. Keep reading to see what you can do.
If you believe that your circumstances are likely to change and you may wish to repay your loan early, then you may want to check your loan terms to see if your lender has a penalty for early redemption. Early redemption charges can make paying off your loan extremely expensive, so if early redemption is potentially an option for you then it is important to look for an instalment loan without early redemption charges.
How does bad credit affect your likelihood of getting a loan?
We all know that bad credit can affect your likelihood of not only getting a loan, but a loan bad credit can also affect your loan terms if you do get accepted. Why is this? If you want to know how and why bad credit can affect your likelihood of getting a loan then you might want to carry on reading.
The postive and the negative The Advantages and Disadvantages
Instalment loans - are they the best loan option? If you're looking into getting yourself an instalment loan, then you need to be aware of negative as well as the positive to avoid any nasty surprises in the future. Take a look at both the pros and cons of instalment loans and see whether they are worth committing to.
Always read your loan terms before agreeing to anything. This will help you to avoid any nasty surprises in the future. Also, it is important to remember that you have a 14-day cooling off period starting from when you sign the loan agreement of which you are free to opt out at any time during that period. Check the Citizen's Advice page for more information on the cooling off period and your rights when getting a loan.
What are the advantages?
Since we're talking in-depth about everything related to instalment loans and their advantages and disadvantages, let's dive into the positive aspect of these loans. What benefits do instalment loans bring to make them superior to other kinds of loans? Moreover, why should you consider getting one? Show More »
You can repay in instalments
The most significant advantage of instalment loans is, the fact that they can be repaid in instalments. This means that they become so much more affordable for the majority of borrowers. Unlike payday loans, which were only offered for a month, and which had to be repaid in full, including interest, instalment loans allow you to repay in regular instalments over the course of several months. This makes your credit much easier to manage financially and will enable you to fit it into your budget. Moreover, you will undergo an affordability check which will ensure that you are financially equipped to repay this loan.
They're accessible to people with all credit ratings
Almost everyone has struggled with bad credit at some point in their lives. Moreover, if you've ever been in that situation yourself, then you will know what it entails: limited borrowing allowances, shorter repayment terms, and a genuinely extortionate interest rate, but worst of all, it means you can get rejected for the loan. Not only do you not get the money, but your credit rating will also suffer. Instalment loans accept people with all kinds of credit scores, so you don't have to worry about not being accepted because of your low rating. That's why having the option of instalment loans with bad credit and with no credit check is so essential - it makes it accessible for people who are struggling. Take advantage of this option and get approved for the loan you need.
You can get them quickly and easily
Generally speaking, it's quite simple to get instalment loans. One of the significant benefits is that you can access them almost anywhere, regardless of what your preferred manner of action is. If you're the kind of person who wants to do things in person, you can just walk into any bank and see what they can offer you. However, more and more people are solving these things online nowadays, and you can find that a lot of lending companies offering instalment loans will give you extremely prompt service. Also, providing you meet the minimum requirements, which are not usually that difficult to meet, you may be able to find out instantly if you were approved or not!
Easily accessible from different lenders
The other thing you should keep in mind is general accessibility. With credit cards, you have to go to a bank; you can get instalment loans from a variety of different lenders and lending companies, both online and on the high street. That means that you will have more options to choose from, so you can browse offers at your leisure, before selecting the most convenient one for your circumstances. « Show Less
What are the disadvantages?
We can't talk about positives without talking about negatives, right? So, let's address less than flattering aspects - what are the risks you take when you get an instalment loan? Why should you avoid them? What should you be concerned about?
The Alternatives Credit Cards vs Instalment Loans
Are instalment loans the only options worth looking into, or are there good alternatives? Credit cards are another popular choice among many borrowers, and with good reason, as they bring many advantages. However, which option is best? You'll need to keep reading to find out.
Benefits of Instalment Loans
Let's start off by talking about the benefits of instalment loans. Why should you consider them as your best option? What can they offer you that other alternatives do not? Is there anything special you should know about? Show More »
You can repay the loan back in instalments
The first thing to note is that you can repay the loan back in regular instalments. This is a pretty standard feature nowadays with most instalment loans, and it can be extremely valuable because it makes the credit so much more affordable and it minimises the chance of defaulting. While payday loans used to be paid in full after one month, with instalment loans you can now benefit from a more extended repayment period, according to how much you borrow. Most people who go for instalment loans because of the fact that they can pay them back easily and fit the instalments into their budgets.
You can get it with bad credit
One thing that a lot of borrowers are very concerned with is their credit rating and how this can affect their ability to borrow money. If you have a poor credit score, you may be familiar with the hardships that can entail. You may even be asking yourself "Can I get instalment loans for bad credit?" Poor credit attracts lower borrowing limits, as well as shorter repayment terms and higher interest rates. In the worst-case scenario, it can hinder you from borrowing altogether, as lenders reject you, thus damaging your score further. It's like a catch-22. That's why having the option of instalment loans with bad credit and with no credit check is so essential - it makes it accessible for people who are struggling.
Easily accessible from different lenders
The other thing you should keep in mind is general accessibility. While with credit cards, you have to go to a bank, you can get instalment loans from a variety of different lenders and lending companies, both online and on the high street. That means that you have more options to choose from, so you can browse offers at your leisure, before selecting the most convenient one.
Also, if one establishment rejects you, you can always move on to another one. However, it is still advisable to perform a soft search before, so that you know for sure whether you would be approved or not and your credit score isn't affected by a possible rejection. Make sure to check the Financial Conduct Authority (FCA) to verify that the lending company you choose is authorised. « Show Less
Benefits of Credit Cards
Moreover, since we considered the benefits of instalment loans, we also have to talk about credit cards. What options do they bring to the table that instalment loans don't? How do they compare? Are they better in any way? Show More »
You can get one at your regular bank
Now, even though a credit card may be limiting regarding places where you can get it from, there are certain perks you may be able to enjoy. Some banks will offer you incentives if you already have a current account with them, so it may be worth looking into what your regular bank can do for you. In addition, we cannot ignore advantages like 0% credit cards. This is a type of credit card that has 0% interest for an introductory period of 6 to 12 months, typically. Assuming you can repay the money before that grace period ends, you get away with a loan with no interest, which is not something you can say about instalment loans.
You can get multiple credit cards
One other benefit is that you can have multiple cards, from numerous places, and serve different purposes. For example, you can have an emergency credit card that you keep in your back pocket, just in case. Then, you might have a credit card that you use all the time. You can have different store cards, if you make regular purchases in individual shops and you want to have the option of paying later for your purchases, etc. This can give you a lot of flexibility that you wouldn't otherwise have with instalment loans.
You can just make the minimum repayments
Where repayment is concerned, the system with credit cards is different, but also similar in some ways. Technically, you incur an amount of debt on your credit card, and you're supposed to pay off the balance at the end of the month. If not, you are going to be paying a non-negligible amount of interest on that money. However, the full repayment is not necessary, if you cannot afford it every month, as you have the option of only paying a minimum required amount, which is only a fraction of the actual debt. So, in that regard, it's kind of like paying in instalments. Of course, you will have to pay off the entire amount at some point. Otherwise, it will continue to increase, and you run into broader issues. « Show Less
Personal Choice Checklist
Of course, which type of lending you go for ultimately comes down to personal choice and what your financial needs are. Here are some excellent questions to ask yourself to determine which option is best: Show More »
- Do you need a one-time loan or an ongoing one?
- Are you ok with repaying much more than you borrowed?
- Do you have a good credit rating?
- Do you have issues managing multiple sources of debt?
- Do you have time to look for lenders and make sure they're legitimate?
In conclusion, both borrowing options can be the perfect financing solution for someone, depending on their needs. You may have numerous questions about them - can instalment loans improve credit ratings? Can you get credit cards with no interest? Can I borrow money with bad credit? You will receive the answers to all of these questions and more and be able to make the best decision for you. « Show Less
Are there any other good alternatives?
Ok, so maybe instalment loans don't sound all that good to you, particularly if you have a poor credit rating that you are struggling with. Are there other ways that can facilitate a loan for you? What borrowing options do you have with a limited score? Here are some alternatives that you may wish to consider, instead. Show More »
Secured loans are a great option if you are concerned with the amount of money you can receive with instalment loans and the maximum limit is too low for your needs. A secured loan solves that problem, as well as that of the short repayment term, because this kind of loan offers a much longer repayment term, extending over several years. The downside is that you have to own an asset that you need to put up as collateral. Moreover, should you become unable to repay further down the line, you can end up losing the asset to the lender.
Peer to Peer Loans
If you don't want to go through banks or lending companies, there is always the option of borrowing from a peer. There are online communities for people willing to lend money, where you can go and make a request and people can choose to extend an offer for a loan, or not. Please be aware that your credit score will still be of interest, as lenders will most likely want to make sure you can reliably pay off the loan. However, even so, this alternative may offer more flexibility than a more traditional option that you may have chosen to forgo.
Continuing along the lines of non-traditional lending, borrowing money from family is, of course, an option most people probably consider. As with any other solution, there are advantages and disadvantages to consider. While they may not ask for a credit score or interest, it is straightforward for relationships to turn sour when financial matters are involved. The terms of the loan would have to be very clear (and hopefully legalised) before you commit to a loan like this.
All in all, in conclusion instalment loans are an option that many people consider when they run into money problems because they offer so many convenient advantages for most borrowers. The fact that you can repay in instalments makes it more affordable, and if you are not looking to cover a massive expense, it can be the right option for you. Be careful, however, of the drawbacks that come with this option, such as high-interest rates. « Show Less
Frequently Asked Questions FAQS
Now that we've wrapped things up, you should be able to make a decision as to whether an instalment loan would be a good option for your financial situation. However, if you're still unsure and have unanswered questions, take a look at our frequently asked questions section to see if we can help.
Who offers instalment loans?
The good news is that plenty of places offer instalment loans. We offer here at Top Rated Personal Loans offer instalment loans of up to £20,000, although you can opt for a loan from a traditional financial institution, like a bank, if your credit rating is high and you are confident that you will easily get approved. Alternatively, you can search online or on the high street for alternative lending companies that can offer you instalment loans for bad credit, instalment loan with no credit check, or other such options tailored for your specific personal needs. Just remember not to take the first offer you receive and to vet the lender before doing business with them thoroughly.
What is the Respresentative APR?
In layman's terms, a representative rate is an overall snapshot of what lenders can expect to pay in interest. However, as different lenders will meet different levels of criteria, this can alter dramatically.
How much will I be able to borrow?
The amount that a lender will offer an applicant can vary based on many factors, such as their term of employment and any current credit commitments. We here at Top Rated Personal Loans generally offer personal loans from £1,000 to £20,000 and will use the information you provide us to ensure our panel of lenders are lending money responsibly.
How long will it take to repay the loan?
The term of the loan can vary depending on how much you're looking to borrow. Loans under £15,000 can be paid with a year, but you may opt for a longer term. Loan terms can vary between 12 to 60 months.
What information will I need when I apply?
In order to apply for a loan with Top Rated Personal Loan, you will need to have the following information to hand.
- Details of your income, along with any amounts you must pay in relation to rent or a mortgage.
- A home telephone number (must be a landline)
- Details of your residence over the last three years
- The name and address of your employer