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Can Installment Loans Improve Credit Ratings?

You've surely heard of installment loans before, and you must know that they can be a great financing solution if you find yourself in a pinch, but can they be used for other things, as well? Namely, improving your credit rating? It seems unlikely, but it's not as strange as it sounds. Keep reading to find out how you can get installment loans, what effect they have on your credit, and whether or not they can actually save your bad credit score.

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How To Obtain An Installment Loan

You may think that an installment loan would be hard to get, but nothing could be farther from the truth. One of the major advantages of installment loans is actually the fact that they are reasonably easily accessible to people in all kinds of different financial situations. Let's see what you need to do in order to get an installment loan.

  1. Figure out how much you need

The very first step, before applying, is to determine how much money you actually want or need to borrow. That is because you will need to state this fact in your application. Installment loans range from small sums to around £5,000 to £10,000, depending on lenders. The average installment loan is around £1000, so if your sum is in the vicinity of that, you should be good to go.

  1. Apply

Of course, 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 for and apply for loans online, because it's much quicker and easier. 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.

  1. Provide documentation

Now, the minimal requirements with loans of this type are not difficult to meet, which is why they're such a popular option. You need to be over 18 years of age, be a resident of the UK, perhaps have a bank account, etc. Approval will also depend on your credit score, and most lending companies will perform a credit check, an ID check, an employment check, an affordability check, etc. They just want to make sure you're a responsible person and that you will be financially reliable.

  1. Stay on top of your repayment schedule

Once you get your money, you can spend it however you like, but you do have to be careful about repaying. You will typically start repaying immediately, in regular, weekly or monthly installments, 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. To see if you are in a good and healthy financial position to be able to borrow and return money, take the financial wellness check offered by The Money Advice Service.

Can I Get One With Bad Credit?

Another massive benefit with payday loans to he repaid in installments 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 installment loans with no credit check, which offer an opportunity for a loan without even taking your credit rating into consideration. Instead, they are more based on income. Then, of course, there are payday loans with 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.

Is It A Good Way To Improve Credit?

An aspect that people are often confused about is the relationship between loans and improving credit ratings. Surely going into debt would negatively affect your credit score instead of improving it, right? Wrong! Indeed, installment loans can be an excellent way to easily improve your credit score, thus opening doors to better deals in the future; let's look at the explanation why.

You see, your score is impacted 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 behaviors that can actually help, including loans.

If you get installment 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. Win-win!

All in all, installment loans are definitely a more complex borrowing option that you probably thought previously. Not only can they be an excellent solution for any financing problem, but they can actually help with a poor rating. Of course, not everyone will want this kind of payday loan, and you may be looking at alternatives, in which case it's worth considering credit card debt vs. installment loans. But regardless of whether you are searching for alternatives, installment loans with no credit check can always be a good fall-back.

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