5 Fast Facts about Instalment Loans

1. You are able to borrow between £100 and £2000

Different lenders will offer different amounts, however in general the minimum amount available on instalment loans is £100 and the maximum is £2000. In the unsecured market they sit nicely in between payday loans and logbook or guarantor loans and are designed for those who have a less than perfect credit history who are looking for a financial solution with longevity. Those that apply for instalment loans are generally unable to find a guarantor or are not willing to lose their car when borrowing through logbook lenders.

2. You can stipulate the loan term to make the repayments fit your budget

As you’d expect, instalment loans are repaid in either weekly or monthly instalments (depending on the amount being applied for). Lenders will allow you to stipulate the term (often using the sliders on their website) to find repayments that fit your budget. By spreading the loan over a longer term you will find that the instalment amounts are smaller but the total repayable amount is large, whilst taking out a short term loan will make the repayments larger but the total repayment amount smaller.

3. They are not in the same category as payday loans

The clue here is in the title, instalment loans are repaid in instalments – payday loans are repaid in full. Payday loans should only ever be seen as a short term fix to financial problems whereas instalment loans can be used as a long term solution. The association probably comes from the fact that instalment loan lenders offer similar amounts to payday lenders however this is really where the likenesses end. Often, borrowers will use instalment loans to repay payday loan debt.

4. They can be used for a variety of purposes

Instalment loans are a variety of personal loan meaning they can be used for a wide range of personal purposes. As I touched on above, a popular use of instalment loans is consolidating short term loan or credit card debt. Many also use instalment loans to cover the cost of expensive car repairs, make home improvements or help out with finishing touches to their wedding plans.

5. Legitimate lenders will not charge a fee

Prior to applying with any lender you should browse their website and check whether or not they charge an upfront fee as part of the application process. It is often brokers who charge a fee for the service of sourcing you a suitable lender; legitimate lenders will not charge any upfront fees. If you are ever asked for your credit card details as part of an instalment loan (or any other loan application for that matter) application, abort it at that stage and tell the lender you are no longer interested. There is a chance the lender will take your bank details (i.e. sort code and account number) upfront however this is only so that they have the details to pay the loan into if the application is successful.

Using Instalment Loans to your Advantage

There are many reasons why someone may take out a loan; they may need additional cash to fund the purchase of a new car or holiday, they may need to make home improvements or they may want to consolidate credit or store card debt. These are all sensible reasons to take out a loan, unfortunately though some people are not so sensible with loans.

Some choose to use short term loans like payday loans to fund spending splurges, unnecessary luxury items or even addictions like online gambling. This can put your finances in danger both in the short term and long term. Throughout this article I’m, going to discuss how an instalment loan can be used to benefit you and your personal finances.

1. Consolidating Short Term Credit

The use of short term credit like payday loans has increased greatly over the past few years. Unfortunately though, due to the interest rates and the nature of the repayments many have found themselves getting into trouble.

In this situation, taking out an instalment loan can be beneficial to your overall financial outlook. By consolidating the outstanding balance(s) into one monthly repayment you’ll not only find that your finances are more organised but you’ll save yourself money in the form of rollover fees and late payment charges.

2. Buying a new car

If your car is getting old and is proving a continuous source of problems then using your money to fix it could be counterproductive in the long run. Rather than spending more and more money repairing it, you could choose to scrap it or sell it and then use an instalment loan to purchase a new one.

By using an instalment loan to help fund the purchase of a new car you could save yourself significant amounts of money in the long run. By buying a newer, more reliable vehicle you’ll find yourself spending considerably less on maintenance. Also, by purchasing a vehicle with a more efficient engine, you may be able to save yourself significant amounts on petrol.

3. Make home improvements

Much like the car analogy, using instalment loans to make home improvements may be a good move for you in the long run. Continuously patching up your house with short term fixes has no longevity and just means that you’ll be doing the same thing all over again in 6 months’ time.

By taking out an instalment loan you can either pay for an expert to carry out the improvement or you can spend more money on better quality goods and do it yourself. Either way spending a little more in the short-term could save you significant amounts in the long term.

The great thing about instalment loans is that you are able to stipulate the loan term and amount to find repayments that fit your budget. Depending on the amount you borrow, lenders will allow you to spread the repayments over a term of 1 to 24 months and some may even offer the opportunity to pay the loan back early.

The Benefits of Taking out an Instalment Loan

All the signs are pointing towards an economic recovery for the UK; Growth is up, unemployment is down and some of us are slowly starting to feel as though our finances are improving. Despite this, many household budgets are still feeling stretched meaning the need for additional finance in the form of loans and credit cards is still there. One particular type of loan that is proving quite popular nowadays is the instalment loans.

Different people have different ideas as to what an instalment loan actually is. Generally though, instalment loan lenders will offer between £300 and £2,000 which is repayable over a term of 3 to 24 months – depending on the amount borrowed. Throughout this article we are going to discuss how taking out an instalment loan could be beneficial to your finances.

1. Flexible on purpose

Instalment loans are a type of unsecured loan which means they can be used for almost any personal purpose. The loan amounts on offer make them perfect for those looking to consolidate payday loan or credit card debt, pay for important car repairs, make much-needed home improvements or spread the cost of a large purchase like a laptop or TV.

2. Repayments to fit your budget

As the applicant you are able to stipulate the repayments to fit your monthly budget. Having decided on the amount required (based on your purpose of the loan) you can then use the sliders on a lenders website to choose your most suitable loan term. By spreading the loan over a longer term you will notice that the monthly instalments are lower but the total repayment amount is higher – it all comes down to your disposable income level. If possible always try to choose a shorter term loan as this will mean your total cost of credit will be lower.

3. Poor credit history considered

If you have a poor credit history then it’s likely that you’ll be turned down for loans via banks, mainstream lenders and even manufacturers financing (i.e. PC World). Instalment loan lenders are able to consider applications from those with a poor credit history or indeed no credit history. While the rates offered will be considerably higher than those offered by the banks, by proving that you can competently repay these rates, you vastly improve your chances of being accepted for low rate credit in the future.

Conclusion

When money is tight it can be tempting to turn to the well-advertised payday loans, while these may offer a short term fix to your problems, they should never be considered as a long-term solution. Instalment loans on the other hand can be used as a long term solution. The majority of lenders are now based online meaning the application is quick and the loan can be paid out the same day as you apply.

Using Instalment Loans for Debt Consolidation

The rate at which payday loans and other short term loans have gained popularity has been alarming. There are various reasons why this may be the case; the regular prime-time TV advertisements, the constant media attention and the rising cost of living could all be to blame.

The problem with payday loans

While the majority of customers are able to repay their payday loans on their scheduled repayment date, there is a percentage who fails to do so and allow their loans to rollover. This can cause real problems; the APR of payday loans is extremely high meaning interest will build on the outstanding loan at a rapid rate. Leaving a payday loan unpaid for a few months could result in the total repayment amount being double what you first expected.

Consolidating the debt

In this situation many will turn to credit cards and even multiple payday loans to pay off their outstanding debt; this isn’t a good idea – payday loans are a short term fix to financial problems, what you need in this situation is a long term solution. One particular option in this situation is to apply for an instalment loan.

Using instalment loans

Instalment loan lenders typically offer between £100 and £2,000 which is repayable over a term of 3 months to two years, either in weekly or monthly instalments – depending on the amount borrowed.

One of the most popular uses of instalment loans is payday loan debt consolidation. Often a borrower will have one or more payday loan that is rolling over and accruing interest on a daily basis, by taking out an instalment loan they can then pay off the payday loans, avoid any further interest or late payment charges and consolidate it into one manageable monthly repayment.

Having one monthly repayment is not only much easier to manage, but it is also much easier to budget for. By choosing a lender that offers fixed monthly repayments you can be sure that (providing you keep up with the repayments) your repayments will never change.

But why don’t you just go to your bank?

Well, having multiple payday loans to your name can in fact affect your credit history and show financial instability – and as we know, financial instability is not an attractive trait to prospective lenders. Unlike banks, instalment loan lenders will be able to help regardless of whether you have payday loan debt to your name.

How do I get an instalment loan?

The majority of lenders are now based online meaning there is very little paperwork involved in the process. The fact that the process is very much online-based (and not reliant on the postal service or any other external factors) means that lenders are able to offer a very quick turnaround on the application. Throughout the process there is a good chance the lender will need to contact you so having your phone on you at all times is important in ensuring there are no delays in the process.

Having been approved for your instalment loan it is then vitally important that you keep up with the repayment throughout the loan term; failure to do so could affect your credit history and further reduce your chances of getting low rate credit in the future.

Instalment Loans vs. Payday Loans

Introduction

Instalment loans were first introduced to bridge the gap between payday loans and credit cards. They’ve done this by offering small amounts of cash (similar to a payday loan) that is repayable in instalments as opposed to in one lump sum.

Despite all of this, many are still comparing payday loans to instalment loans. On paper the products may look relatively similar, but when you scratch beneath the surface they are in fact very different. Throughout this article we are going pit the two products against each other and reveal how they differ.

The amount offered

The instalment loan market is very diverse and the amount offered differs from lender to lender, generally speaking though lenders will offer between £100 and £2000. The amount offered by payday loans also differs between lenders however typically they will offer between £20 and £500.

The repayment terms

As you’d expect from the title, instalment loans are designed to be repaid in either weekly or monthly instalments. The loan term available will depend on the amount borrowed however generally lenders will allow you to repay the loan over a term of 1 to 24 months.

Payday loans on the other hand are designed to be repaid in full at the borrowers next payday. There are no instalments, you simply payback your loan in one lump sum.

The rates

Again, each lender will offer a slightly different rate with some instalment loan lenders hovering around the 200% APR and others being nearer 1000%. Despite this, instalment loans are still seen as a cheaper alternative to payday loans. This is because the rate of payday loans ranges from 1500% and 5000% APR, however this is soon set to be capped according to recent news stories.

The approval time

Payday lenders will pride themselves on their ability to pay a loan out within an hour of the application being made. They are able to do this because all of the eligibility checks involved in the process will be automated meaning there is no paperwork involved.

Instalment lenders will also offer a quick turnaround time, however due to the fact that they are often lending slightly larger amounts – there will be a few more eligibility checks involved. It is likely that there will be both a credit check and an affordability check simply to assess the applicant’s repayment ability. Providing everything goes through smoothly, an instalment loan can still be paid out within a few hours of applying.

Conclusion

Whilst payday loans certainly have their place in the loan market, it shouldn’t be forgotten that they are a last resort and not a first port of call to financial problems. In essence, they are a short-term fix and if you’re looking for a more long-term solution then I’d recommend looking elsewhere.