If you have a steady income and you're looking for a loan with structured, regular repayments, an installment loan may be the right financial product for you.
Installment loans have set payment terms to adhere to, and you'll pay regular monthly installments until your loan is paid off in full. This is an attractive option for many people in the UK because it offers transparency. You know exactly how much you're going to pay every month, and you know the date that your loan will be paid off before you sign up for your loan.
If you're looking to learn more about these loans, look no further. This guide will tell you everything you need to know about installment loans and why they are so popular in the UK.
Benefits of Installment loans vs Credit Cards
It's important to consider the pro's and con's of installment loans loans before jumping into any serious agreements. Once your loan application is accepted, you enter into an agreement with your lender stating that you will pay the money back according to their set payment terms. Failing to stick to this agreement can lead to serious legal and financial complications, so it's crucial to assess other options so that you know you're making the right decision.
Credit cards are an alternative option to installment loans. Instead of paying the same amount every month, you can pay as much as you can afford towards your credit card debt until the balance is paid off. However, there are a number of hidden charges such as late payment fees and fees for using your credit card abroad. Below are some of the other advantages that installment loans have compared to credit cards.
You have the option to pay off over chosen period
One of the main advantages of these types of loans is that you can choose the repayment period. When you apply for an installment loan, you choose how much you want to borrow and you choose the length of time you'll need to pay it back. This is a useful feature because you can spread your payments over a longer period of time; giving you the option to break down your loan into manageable monthly repayments.
Despite this, it's important to note that in many cases, the longer you take to pay off your loan, the more interest you'll have to pay. In addition to this, some loans have early repayment charges. This means that you'll have to pay a fee if you want to pay off the rest of the loan before the end of the repayment period. Be sure to check the terms and conditions of a loan before applying to see if there are any hidden fees.
Your loan WILL be paid off
If you opt for an installment loan, you're safe in the knowledge that your loan WILL be paid off. Your loan repayment date is outlined from the start so you know exactly when your monthly repayments will end. This can provide you with the motivation to pay off your loan as there is a clear end-goal in sight.
You have set payment terms
Another benefit of installment loans is that they have set payment terms. As mentioned above, you know exactly when your loan will be paid off. As well as this, you'll know exactly how much you have to repay and when.
This makes it easier to budget around your monthly repayments, which also means that you're less likely to miss payment deadlines and fall into a spiral of debt.
Credit cards are ongoing debt
When choosing whether to take out a loan or a credit card, it's crucial to remember that a credit card is an ongoing debt. This means that if you only pay the minimum amount set by the lender, you'll never clear the total debt. As well as this, if you miss payments on your credit cards, you'll be charged late payment fees. This can cause you to enter a debt crisis and leave you with significant financial problems in the future. That's why it's crucial to pay as much as possible per month and pay on time if you choose to opt for a credit card.
'Can I Get Installment Loans for Bad Credit?'
If you're struggling to obtain credit or you've had a loan application rejected in the past, you may have asked yourself 'can I get installment loans for bad credit?'. Fortunately, the answer is yes. Find out more below.
Secured installment loans
Some lenders may offer secured installment loans to those with bad credit. 'Secured' loans are those that are secured against a sizeable asset that you own, such your car or your house. It's important to note that interest rates for secured loans are usually lower than that of unsecured loans. Despite this, you'll lose your car or house if you default on your monthly repayments, therefore this is seen as more of a risky option that unsecured loans.
No credit check installment loans
You may benefit from a no credit check installment loan, if you've had trouble securing credit in the past. A 'no credit check' loan is exactly as it sounds. Lenders will not perform a credit check before deciding whether to lend to you, however, they may look at other aspects of your financial history to determine whether you'll be able to repay the debt.
As well as this, you may be able to obtain an unsecured no credit check loan, which means that you won't have to worry about losing your assets if you can't keep up with repayments.
Are installment loans the best option?
The answer to this question will largely depend on your individual situation. If you are organised and prefer to budget, you may benefit from an installment loan. Whereas, if your income is sporadic and irregular, it may be difficult to make the monthly repayments, in which case, an option such as a credit card may be more suitable.