What are instalment loans?
With traditional payday loans, customers typically borrow a small amount of money from lenders and repay the full loan (with interest) in one repayment, often inline with their next payday.
In certain situations high cost short term loans provide the instant cash required to get out of a sticky situation. However payday loans must be treated with care, as if mishandled they can result in increased financial pressure or cause a continuation of existing financial problems. Unlike payday loans, Instalment loans offer more predictability by allowing customers to plan out manageable repayments of a small loan over a longer period of time.
How do instalment plans work?
Instead of repaying a loan with one repayment, instalment loans allow borrowers to break down their loan repayment and schedule their repayments over weeks, months and, in some cases, years. This can be beneficial when planning how to pay for car repairs, outstanding bills and even day to day costs.
Although these factors all affect the amount you could borrow, they more importantly also form the basis on whether a lender will even lend to you in the first place. Lenders will look at each of these factors and use them to determine the risk associated with lending to you. The more risky you seem as a borrower the more they will charge in interest. This is in order to cover the potential for any missed payments.
How to apply for an instalment loan?
In order to receive an instalment loan, you need to apply with a direct lender. This application process requires a hard credit check (which does affect your credit score).In addition to a credit check, you need to verify your income, bank account, phone number, some form of identification and a guarantee that you intend to pay back your loan. Depending on your credit score, lenders may also review how much debt you have and your monthly transactions.
Before you do apply, Choose Wisely can help you confirm if you will be accepted in principle by specific lenders by checking your application against a full panel of lenders (which does not affect your credit score).
What are examples of instalment loans?
Most direct lenders in the UK provide an option to pay back a loan in installments as opposed to paying back the full loan amount in a lump sum. Many loans commonly use installment plans due to the type of transactions being completed. Mortgages, personal loans and car loans offer instalment plans since customers pay a fixed interest rate and predictable payment plan.
What are the best instalment loans for bad credit?
If you have a poor credit history it’s unlikely you’ll be able to access the cheap loans offered by the highstreet banks and supermarkets. The best chance of acceptance is to compare alternative lenders in the market that offer products designed for those with bad credit, such as guarantor loans or short term loans. To compare lenders that will accept your application for a bad credit instalment loan you can complete a loan search on Choose Wisely.
Instalment loans FAQs
In the event that you are unable to repay your loan on time, you may be charged added interest and a default fee – making your loan more expensive overall.
The key thing to remember is that if you are struggling to keep up with your payments, it is important to notify your lender as soon as possible.
When you submit a loan application with a lender you will be credit checked. If you are declined for credit or make multiple applications in a short space of time this is likely to reduce to your credit score.