An unprecedented emergency can hit your right off the bat. You may not always have financial aid available at that instant. And, if you don’t have an emergency fund or credit card to bank upon, a short-term loan might come in handy.
Instalment loans are ideal to solve this purpose. An instalment is a short term financial aid that you can repay over a set period of time through fixed monthly instalments. Instalment loans fall under the umbrella of Personal Loans. These loans give you the freedom of choosing your own time frame across which you want to spread your repayments. The length of your loan term might vary between 1 year and 5 years.
Interest on these loans can vary from lender to lender. Lenders take your income, expenses, debt-to-income ratio, credit score and profile, loan amount, term, and your current employment status into account. If you demonstrate a stellar credit history and satisfy all other prerequisites, you can borrow up to £35,000
In this article, we’ll learn more about the intricacies of an instalment loan and how to apply for one.
How do instalment loans work?
Applying for an instalment loan is a pretty straightforward process, like any other loan. You pay an instalment loan in fixed monthly repayments until the loan has been paid in full along with the interest. The loan term for this loan lasts for months or years, depending upon your convenience to repay. Choose your repayment period carefully, keeping your affordability in mind.
All you need to do is fill an online application with your official details such as your address, employment status, income, expenses, the purpose of the loan, and the loan term.
Once your application is complete, the lender will assess your profile in accordance with their lending criteria. If they approve your application, you will be notified by the lender. When lenders review your application, they check your creditworthiness to decide their terms and the loan amount that they are willing to lend.
Eligibility criteria for instalment loans
If you’re planning on applying for an instalment loan, you must meet the basic eligibility criteria, stated below:
- You are aged 18 years or over
- Be a Current UK Resident
- Be in Full or Part-Time Employment, including Self-Employed
- Earn a Regular Income
- Be able to Provide Bank Account and Debit Card details.
As long as you meet these basic criteria, you may be able to secure a good deal with your lender.
Merits of using an instalment loan
There are many advantages of an instalment loan, apart from the flexibility that it offers. Some of them are listed below:
- The application process is quick and hassle-free and can be completed online as well as offline.
- The loan repayment schedule is structured specifically for you based on your payment frequency such as weekly or monthly.
- All applicable terms and obligations such as the interest rate are presented upfront.
- The interest rate on these loans is relatively lower, compared to other financial products
- An instalment loan may be able to help you with your credit score
Instalment loans and your credit score
When you take out an instalment loan, the lender will send your data to the Credit Bureaus. Your entire information pertaining to this loan will be recorded on your credit profile and shared with the credit bureaus. The credit bureaus then update your profile accordingly, based on the data they get from the lender.
Thus, you must ensure that you pay the monthly instalments in full and on time. This will greatly improve your credit score, and you get a chance to benefit from the credit mix. If your credit report has a mix of financial products, it contributes greatly towards your credit score.
An instalment loan, thus, can prove to be the ideal way to give your credit score boost. However, be particular with respect to your monthly repayments, because in case of a default in repayments, you may end up in debt. Moreover, failure in repayments will be detrimental to your credit score.
If you wish to use an instalment loan to bridge some financial gaps, shop around a little for some good deals. Visit Oyster Loans to find your ideal loan offer.