An instalment loan refers to borrowing a sum of money and repaying in staggered repayments rather than in one lump sum. The instalment loan lenders that are recommended by The Lenders List allow customers to borrowers up to £1,500 and repay up over, 2,3,5,6 or 12 months in instalments. This is different to a payday loan where you borrow a similar amount and have to repay in one lump sum on your next pay date, which is usually at the end of the month making your loan last for 14 to 30 days in total. Both payday and instalment loans are unsecured meaning that you do not need to put down anything as collateral in order to secure the loan such as a house or car.
Instalment loans repayments offer flexibility which is why its no surprise that they are becoming more and more popular with UK borrowers. With a payday loan, you are forced to repay the full loan amount and interest on your next pay date which may put pressure on your finances. Borrowers typically require loans of this nature for emergency expenses. Common reasons for loans include broken boilers, car repairs, dental bills and rent. These are expenses that come out of the blue and are hard to plan for. This is why an instalment loan may be suitable in order to reduce one’s financial pressure. The opportunity to repay over a longer period of time means you keep the money you borrowed initially for a little bit longer and you get to repay in smaller amounts each month. There are various lenders such as Wizzcash and Peachy where the instalment loans are repaid in equal instalments each month and there are lenders such as Mr Lender where the instalments are repaid in different amounts each month:
Something that adds to the flexibility to the process is being able to repay the loan off early. With various instalment lenders offering no early repayment should you decide to clear your loan early. Although you may take out a 12 month loan, you may find that half way through that your finances are back on track and you are able to pay off the balance – and this makes much more sense rather than having the loan hang on your head for another 6 months. Some instalment loans online allow you repay early with no extra charges, only making you pay for the daily interest that you have accrued up to that date. By comparison, some lenders will charge you a penalty fee for early repayment, but overall it may still work out cheaper.
It is important to compare instalment loans. Recent investigations into the industry have found that the average borrower who takes out up to 6 payday loans a year is likely to save over £100 a year on their loans simply by comparing. What’s important to know is that some instalment loans are a little bit cheaper than payday loans. Wizzcash offers a rate of 0.72% daily interest and Quickquid offers a rate of 0.82% which are both much cheaper than your standard payday loan daily interest rate of 1%. We expect the instalment industry to grow rapidly as lenders become more competitive over price and borrowers look to spread repayment over a longer period of time.
Instalment Loans for Bad Credit
Customer looking for instalment loans online for bad credit are specifically because the individual feels that they may not meet the lender’s criteria based on their credit rating. A credit score is allocated to every individual and reflects how well a customer has paid previous loans and forms of credit in the past. A high credit score suggests a good repayment history whereas a low credit score indicates a poor repayment record. Several payday lenders run credit checks on their applicants before providing a loan so for those users with poor credit, they may search for instalment loans for bad credit.
The lenders we feature on The Lenders List each have an individual page stating whether they run credit checks or not as part of the application so it is worth researching the pages prior to your application. Other typical requirements for a loan include a basic criteria such as being over 18, living in the UK, having a working debit account, a mobile phone and in some kind of employment. Affordability checks are a key aspect when deciding who gets a loan – this matches the amount a customer wishes to borrow with what they can afford to repay. A good affordability check means that a lender will adjust the amount that the customer has requested to borrow so that they can afford the repayments whilst taking their current expenditure into consideration. Lenders may carry out affordability checks by confirming a customer’s salary via a pay-slip or bank statement, asking how much a customer pays a month for their car, rent, bills and utilities and matching this with the repayment amount due at the end of the month,
Types of Instalment Loans
There are several types of instalment loan products available with more and more lenders offering staggered repayments. Below we list some of the most common loans in this space:
3 Month Loans
3 month loans are the closest payday loans alternative giving customers the flexibility to stagger payments as 90 day loans. This gives that little extra flexibility over a payday loan and with some lenders offering a cheaper daily interest rate for 3 month loans, if the lender gives your the opportunity to repay early, you will find that the entire cost is a lot cheaper than a payday loan too.
6 Month Loans
The 6 month loan product gives slightly more flexibility that then 3 month loan. A 6 month loan is ideal if you require up to £1,500 for an emergency but need a bit more time to get your finances in order. The 6 month mark is a good period of time to allow you get back on track. When it comes to repayment, some lenders will allow you to repay in equal monthly instalments whereas some will have different amounts paid each month or even one final payment at the end of the month.
12 Months Loans
This offers the greatest flexibility of the payday/instalment products. For those borrowers who are in need of short term funds and are not entirely certain when they can make their next repayment, to be on the safe side, a 12 month loan is a sensible option. When it comes to the cost of repayment, the price of a 12 month loan is typically double what you initially borrowed or slightly less e.g if you borrow £300, you will likely pay £600 in total at the end of the 12 month period. Repayments are typically collected in equal amounts on a monthly basis but as mentioned above, if your lender of choice allows you to repay early, you may be able to save a lot of money by clearing your account earlier.
The Lenders List compares a number of payday and instalment lenders. To see repayment examples and the types of checks that lenders do, we invite you to look at our individual lender pages for more information. Our service is completely free to use and always will be. When you select the lender of your choice, you can simply click through to apply on their website and deal with the company directly. Please see our useful information on our homepage about how to apply for a loan, the checks involved and the implications of non-repayment.
For more information about the loans we offer. Please find the video below which explains how The Lenders List works, how instalment loans are different to payday loans and why it is important to compare instalment loans.