Instalment Loans

A Guide to Instalment Loans

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An emergency fund is an absolute necessity because all of us must have witnessed situations where we find ourselves stuck with no financial help to resolve the issue. However, it is not possible for everyone to build a safety net with the sluggish wage growth – which has been in the limelight for recent years. A recent report by Britain’s largest debt charity, StepChange, has revealed that more than 331,000 people contacted them in the first half of 2019 to ask for debt-related problems. Short-term Loans are a flexible mode of borrowing money and can prove to be beneficial – only if you use it wisely and responsibly. As a borrower, you also have some responsibilities while taking out a loan. Emergencies such as boiler replacement, car repair, and medical bill need a quick fix. There are a variety of reasons people apply for an instalment loan. Basically, these loans help you tide over financial emergencies that you may face out of the blue. Or, whenever an individual wants to purchase something and they do not have the cash upfront for it – they prefer an instalment loan. Borrowers choose this over a credit card because of the flexibility it offers in terms of repayment.

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What is an Instalment Loan?

An instalment loan is an unsecured short-term loan that allows you to borrow an amount that you can repay in instalments (generally, monthly) over time. A borrower can choose the amount that they decide to take out and they also have to specify the time they will take to repay the debt to the lender. No collateral is required to secure these loans. That means none of your valuables can be possessed by the lender if you fail to meet the repayments. You can easily spread the cost of repayments over several months. Please note that there are two types of interest rates – fixed, and variable. When you borrow a loan with a fixed rate of interest, you have to pay fixed monthly instalments. If you borrow a loan, which has a variable rate of interest, then the monthly instalment amount may vary each month.

How Do They Work?

Unlike a payday loan, instalment loans allow you to borrow money for more than one month. With this loan, you can repay the amount within 12 months. In addition to that, it allows you to make the repayments in monthly instalments. That means you will not have any financial burden to clear off the debt immediately. You can apply for an Instalment Loan Online in the United Kingdom. Depending on your requirements, you can choose a short-term or a long-term loan. Long-term instalment loans are nothing but personal loans that you can take out and repay within 84 months. The range of duration varies from lender to lender. Visit the website of the lender or credit broker and fill the application form with all the details that are asked in the form to enable the lenders to assess your creditworthiness and affordability to make their decision. Submit it online and wait for a few minutes as the lenders do not take much time to give their decision. It will be displayed on the screen, and if the loan application is approved by the lender – you may get the funds in your bank account within the same day. In some cases, the lenders may also transfer the money within a few hours. However, it also depends on your bank. You can use the money that you have received for literally any purpose – such as debt consolidation, home improvements, medical bill, and financing a wedding.

Types of Instalment Loans

Almost all loans are instalment loans. They are not a special type of financial product. Any loan which is repaid in scheduled portions is termed as instalment loans. Instalment loans are Personal Loans that people consider to borrow to fulfil their needs.

Listed below are a few examples of instalment loans:

  • Wedding Loans
  • Holiday Loans
  • Student Loans
  • Car Loans
  • Self-employed Loans
  • Short-term Loans
  • Christmas Loans
  • Home Improvement Loans
  • Quick Loans
  • 12-month Loans
  • Homeowner Loans
  • Debt consolidation Loans
  • No Guarantor Loans
  • Small Loans

All these are instalment loans as the borrower has to repay them over several months in monthly instalments. Lenders and credit introducers advertise these under different names so that it will be easier for the borrowers to pick the one they are looking for according to their purpose. For example, suppose you are looking to arrange funds for your wedding, you can choose a wedding loan, which is an instalment loan.

Benefits of Using an Instalment Loans

Knowing the benefits of a product helps us in choosing the right one and to make the right decision. Instalment Loans (Short-term and long-term) offers a lot of benefits to the borrower. This is a flexible and smarter way of borrowing money as compared to other financial products due to a variety of reasons.

Flexible Loan Amounts
An individual who is borrowing a loan can choose the loan amount they need while applying for the loan. Choose the amount according to your financial requirements, however, also take into consideration your ability to repay the amount that you’re opting for.

Plethora of Options
Most of the brick and mortar lenders have come online and are now offering these loans online. So, you have a wide array of options to choose from. Ensure that you view deals from multiple lenders rather than settling for the one you find at the first go.

Predictable Monthly Payments
When you sign the loan agreement, the loan term, duration, how much you to have to pay each month and every such detail will be clearly mentioned on it. So, if you know how much amount of money you have to spend towards the repayment of the debt – it will allow you to make a budget and stick to it. This way, you will not end up spending more than necessary and also, it will offer you a chance to save money and gain control over your finances.

Payment Plan
Most of the people do not want a big loan that will take years to repay. Such people can choose the repayment period according to their financial capability as an instalment loan also allows you to take out a loan for 3 months. Typically, lenders allow you to borrow a loan for 3 months to 84 months.

Quick Decision
You do not have to wait for hours or days to know the status of your loan application. You will get the decision of the lender within a few minutes after you submit the application online. It will save you a great deal of time and effort.

Interest Rates
As compared to credit cards, the rate of interest on these loans is lower. Also, when you use your credit card to borrow money, you have to make the complete payment on your next due date to avoid interest charge. If you decide to pay off the debt in instalments, the rate of interest most credit card companies levy is higher as compared to short-term instalment loans.

Options for All Credit Ratings
It’s a myth that people with a not so perfect credit record do not get a loan. The lenders have evolved a lot with time and now some of them are offering loans to people who do not have a good credit score. The rate of interest that they will be offered might be a bit higher as compared to the rates offered to an individual who has a perfect credit score. Every lender has its own lending criteria.

What is the Eligibility Criteria for Applying for an Instalment Loan?

When you decide to apply for a short-term loan, make sure to check the eligibility criteria of the lender. Being sure about it before you apply will save you time and also may help you to protect your credit score from being harmed. Lending criteria may vary with respect to the lender you’re dealing with. We’ve listed a few criteria that are basic:

  • Age: You must be 18 years or above when you are applying for a loan. Almost all the lenders have this criterion that the applicant must be 18 years or older to apply.
  • Citizenship: You must be a legal citizen of the United Kingdom. A few documents may be needed to prove this and you may have to upload them online for the lenders to run their verification.
  • Bank Account: Having a valid and functional bank account is also mandatory for some lenders as they prefer to transfer the funds directly to your bank account.
  • Income: The lenders need to be assured that you will repay the loan that you have borrowed from them. And if you have a regular or stable source of income – it becomes a bit easier for them to outline their conclusion.

Apart from this, there are several other factors, which are taken into consideration by a lender while assessing your loan application to make their decision.

How Much Can You Borrow?

Borrowing amount for an instalment loan may vary with each lender and also depends on an individual’s own borrowing capacity. Also, different lenders offer different range of amounts for borrowing. With Oyster Loan, if you’re considering to borrow a short-term loan, our lenders will offer you to choose an amount ranging from £100 to £1,000, which you have to repay within 12 months. If you need a personal loan, our lenders have a different range that is from £1,000 to £35,000 – which needs to be repaid from one year to seven years.

However, this is not guaranteed as there are many other factors that are well-thought-out by the lenders for deciding the loan amount that you can take out from them.

  • Income: A lender checks your monthly income to gauge your affordability. This is one of the significant factors that almost every lender needs to know when about an applicant.
  • Expenses: Your monthly expenses helps the lender to form an idea of whether you will be able to repay the loan. They may calculate your debt-to-income ratio to know how much you earn each month and how much do you spend and if you will have anything left for the repayment after that.
  • Duration: The loan duration that you’ve opted for is also a major determinant of the loan amount that you can take out.
  • Credit Score: Every lender who is authorised by the Financial Conduct Authority (FCA) has to run a credit check to evaluate your affordability and creditworthiness. Your credit score also plays an important role that influences your borrowing amount.

Pros and Cons of an Instalment Loan

You must weigh your options carefully before legally entering into a deal. This product is quite helpful especially when you are tight with your finances. Some people choose a loan in a cash-strapped situation while some of them need a loan to cover the shortfall in their expenses.

Pros Cons
You can gain quick access to funds if you’re in an emergency. It doesn’t take more than a couple of minutes for you to fill up the application form. Also, the lender gives their decision within a few minutes of application submission. The rate of interest that you will be offered by the lenders may be a bit higher as compared to secured loans.
You do not need a lot of documents to apply for an instalment loan. The lender may specify the documents that they need for verification, and approval of your loan application. If you choose to repay the loan before the agreed end date – the lender may charge you an additional prepayment penalty. However, not all lenders have the same lending criteria. Therefore, check with your lender before considering to clear off your debt sooner than agreed.
If you make the repayments on time and in full – your credit score will improve. It may not happen overnight as it is a gradual process.
You do not have to worry about the repayments as these loans allow you to create a flexible repayment plan. The cost of repayment can be spread over several months that will allow you a financial breathing space.

Do’s and Don’ts of an Instalment Loan

There are certain things that you must do and you must avoid when you’re considering to borrow an instalment loan.

Do’s

  • Tick Icon Compare multiple offers from different lenders to choose the best one that is available to you. It may help you in saving money – as you may pay less in interest.
  • Tick Icon Use eligibility checkers to gauge how well do you fit for the lending criteria mentioned by the lender.
  • Tick Icon Draft a repayment strategy to stay on the track. If you fail to meet the repayments, it may impact your financial fitness.
  • Tick Icon Choose the loan amount cautiously. Never borrow a loan that you cannot afford to repay. If possible, pick a short-term one and spread the cost of repayments over a few months.
  • Tick Icon Ensure your repayment date is near your payday – as this will enable you to manage your cash flow.
  • Tick Icon Carefully read the Terms & Conditions of the lender to know what you will be dealing with and how to manage the loan that you are about to take out.

Cons

  • Cross Icon Do not ignore your credit report. Check your report before applying and scan for any errors. If you find any error on your report, get it fixed and then apply for an instalment loan.
  • Cross Icon Do not deal with lenders and credit brokers who are not registered by the Financial Conduct Authority as it may be a probable scam.
  • Cross Icon Do not provide inaccurate information in the application form – it may lead to rejection. The lenders need correct details about you to make their decision.

Frequently Asked Questions

In this section, you will find answers to 10+ questions about instalment loans that you must be thinking about. If a question is not listed and you need an answer to it – please drop your feedback so that we can help you with it.

Am I eligible for an instalment loan?

The lending criteria of every lender varies with the borrower. You may check their eligibility criteria before applying for an instalment loan. Only apply to those lenders whose criteria you seem to match with. However, there are a few basic criteria that you must meet, which are (1) you must 18 years of age or above, (2) you must be a legal citizen of the UK, and (3) you must have a valid bank account.

I have a bad credit score. Can I still get a loan?

It depends on the lender you’re applying to. Some lenders agree to lend money to individuals who do not have a perfect credit record while some of them may not feel happy to take the risk. We have some lenders on our panel who are willing to lend money to bad credit score profiles.

If approved, how much do I have to pay back each month?

The amount that you have to pay each month depends on the loan amount and tenure that you have chosen. Your monthly repayment amount will be fixed that means you will know how much you need to pay every month towards your debt.

Are there any late fees?

The loan will be lent to you by the lender and the repayment will be done by you to the lender. So, it depends on the lender’s criteria and Terms & Conditions about the late fees. Ensure to go through the fine print proposed by the lender to manage your repayments.

How much will you charge me if I choose to deal with any of your lenders?

We’re authorised by the Financial Conduct Authority so as all our partner lenders. We do not charge any upfront fees to our borrowers. That means, if you choose to go ahead with any of our lenders, you will not have to pay us anything. Our aim is to help you find the right lender according to your needs.

When will I receive the money?

Our lenders will give their decision a few minutes after you submit your loan application online. If it is approved, you may receive the funds on the same day. However, it also depends on your bank. Check with your lender once to know how much time they will take to transfer the money.

What are the reasons for which I cannot use the money?

You may use the money to treat your short-term cash flow issues. However, you must not use the money for investing in stock market, trading, illegal purposes, gambling, or to lend the money to someone else who doesn’t have a good credit score.

Do I need to be in employment?

An instalment loan is unsecured and hence, there is no collateral involved. A lender willingly takes the risk to lend you money and if you fail to repay the loan – the lender does not have any rights to possess your valuables such as your car, your home, etc. That is the reason, the lenders need to be assured that you have a regular and stable source of income. A source of income is an indicator that you will be able to manage the repayments.

What happens if I fail to pay back on time?

When you do not pay back on time and in full – your credit score will be harmed. After a certain number of failures, the lender may report it and you may receive a County Court Judgement (CCJ). It will impact your future borrowings as most of the lenders consider your profile to be riskier. And you may not be able to borrow money for the next 6 years.

How long can I borrow the money for?

If you borrow a short-term loan on instalment, our lenders may allow you to borrow an amount ranging from £100 to £1,000. You have to make the repayments within 12 months. If you choose a personal loan on instalment, you may borrow from £1,000 to £35,000. You can spread the cost of repayment from 12 months to 84 months.

Do you provide no credit check loans?

No. All our lenders are authorised by the FCA and they need to run a credit check to provide their decision. However, they conduct a soft credit check to offer you the initial quotes and to assess your affordability and eligibility. A soft credit check doesn’t harm your credit score and that’s how we help you to protect your score when you apply through us.

Can I pay back my loan early?

Depends on the lender that you’re dealing with. Some lenders may also charge you an additional fee known as early repayment penalty if you pay back the loan before the agreed end date. Therefore, read the Terms & Conditions and discuss it with your lender before you consider paying back early.

If you think that an instalment loan is right for you, take out a couple of minutes to apply with us, without hurting your credit score.

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