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Instalment Loans

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When you search for a loan with us, a soft search will be carried out on your credit file to match you with the most suitable offer. All lenders on our panel are authorised by the FCA and will conduct a hard credit check if you proceed to take out a loan with them.

Representative Example: £400 loan repayable over 39 weeks at £18.96 per week, Rate of interest 113.46% p.a fixed; Representative 498.78% APR, Total amount payable is £739.44.

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What are Instalment Loans?

Instalments loans are loans that allow individuals to borrow cash that they will repay in fixed amounts over a specific period of time. Instalment loans have two or more payments, and repayment periods can be as little as three months or as long as three years.

Some instalment loans are secured by collateral while others are not (unsecured loans). The collateral is used to guarantee that the borrower will repay the loan. In case the borrower defaults, the lender will take ownership of the collateral.

How Do You Apply for Instalment Loans and How Does It Work?

The process of obtaining an instalment loan and paying it back varies from one lender to another. It is recommended to understand the terms of the agreement before borrowing. When you apply for an instalment loan, you first fill out a form with all your details. The lender then discusses with you further details such as repayments amount, terms and payment schedule.

During your application, most lenders will carry out a credit check on you to determine your eligibility. Proof of your income and bank account information - to see if the deposits are made to you by your employer - may be requested by some lenders. After your loan has been approved and money has been sent to you, you will be expected to repay it using monthly repayments.

How to Qualify for An Installment Loan

Like all short term loans, the borrower will have to meet several requirements. You will need to have a fairly low debt to income (DTI) ratio. This ratio represents your debt payments and monthly expenses to your monthly income. The borrower should also have a stable and dependable source of income. Lastly, some loans will be secured using collateral such as home or automobile.

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Examples of Instalment Loans

The most common types of instalment loans are personal loans, auto loans and mortgage loans.

Mortgage Loans

The most common loan terms are between 15 and 30 years. The loan can have a fixed or variable interest rate. Variable rates are usually adjusted according to the variations in market interest rates. A borrower can secure a mortgage by using his home so that in case of a default, the creditor will repossess the home.

Personal Loans

A borrower can use a personal loan to cover unexpected bills such as home repairs or medical expenses. The term may vary from 12- 96 months or more. Most of these loans are unsecured and have higher interest rates compared to secured loans.

Auto Loans

The ordinary loan term is between three to four years, but some lenders offer a longer-term for borrowers buying expensive car models. You can get auto loans from online lenders, credit unions, banks or in some dealerships.

Benefits of Instalment Loans

1. Fixed payments.

A borrower will not need to worry about increasing rates when the loan has fixed interest rates. There will be no sudden jump in the APR. This allows for better financial management and planning.

2. Small instalment loans are easier to manage.

Breaking down a lump sum into manageable instalments lets you make repayments without hurting your pocket.

Drawbacks of Instalment Loans

1. Unflexible terms

Instalment loan terms are negotiated before closing the deal, and the borrower must adhere to them. The borrower cannot renegotiate the terms even if the circumstances change. The repayments, interest rate, term and schedule will remain constant unless the borrower wants to default on the loan.

2. Variable vs fixed interest rates

Most instalment loans will have a fixed interest rate. The fixed-rate will not respond to the market rates. Thus, it can remain high even when the market rates are low. This will force the borrower to pay high-interest rates even when there could be an option for lower rates.

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Instalment Loans FAQ’s

Can I apply for instalment loans online?

Yes. Most lenders have online application platforms. You can check the eligibility requirements of the lender before applying for an instalment loan. You can also use a broker, like Loanza to connect you with the best lenders.

Can I get an instalment loan with bad credit?

Sure! Having a good score is an advantage in securing loans, but not all borrowers have a perfect credit history. Some lenders will overlook your credit score and check for affordability instead. They will ask you to provide proof of a stable income.

Can I repay the loan early, and how will that affect my credit?

Of course. You may pay the loan in full early, but you must first contact your creditor. Some lenders may charge early repayment fees, so make sure you are aware before taking out a loan.

Paying off your loan in full will be beneficial to you because you will be debt-free, and you will save more money. You will no longer have to worry about paying your loan installment every month. But, it may not necessarily help your credit score. Unlike paying off the total amount in full, making consistent monthly repayments will keep your account open and active. This will show that you can manage your credit, which will give you a good credit score.

What should I keep an eye on when applying for an instalment loan?

With any kind of loan application, including installment loans for bad credit direct lenders only, you need to make sure your lender or broker is legitimate. They have to be authorised and regulated by the financial conduct authority fca. Check the interest rates they offer, and also the representative example. The representative example should show you the monthly repayments, and total amount payable. To be absolutely sure, you can search the lender or broker's trading name on the financial conduct authority website. The address of the registered office should be disclosed by the direct lenders and brokers as well. A company registered in England or Scotland should be safe since you need funding in the UK.

Final Thoughts...

Before taking out an instalment loan, be sure to first understand the lender’s terms and conditions and your personalised offer (ie. your total amount payable, interest rates, monthly repayments). You can use a broker like Loanza to take the research off your shoulders and connect you to a trusted lender.

Looking for an instalment loan?

We can connect you to trusted a lender in minutes.

Apply Now