An instalment loan is the ideal solution for people who need to access a chunk of money quickly to cover short-term expenses. With instalment loans, the borrower receives the money upfront, then pays the loan back in smaller amounts over a fixed weekly, fortnightly or monthly period.
You don’t need to worry about having funds readily available to pay the whole loan back on your next payday, you can break it down into more manageable chunks paid back at a fixed interest rate. Not sure if an instalment loan is right for you? Find out more in our guide below:
An instalment loan is a type of personal loan which is paid out to the borrower in one lump sum. After receiving the money, the borrower then starts to pay the money back with added interest in scheduled payments over a pre-agreed time frame (referred to as the loan term).
The loan can either be repaid in weekly, fortnightly or monthly instalments over the term, until the money has been paid back in full
The term instalment loan is used to categorise any loan that you pay back in smaller chunks called ‘instalments’ over a long period, rather than paying it back in a single repayment.
Instalment loans are used to categorise the majority of personal loans. For example, the most common instalment loan types are mortgages, personal loans, short term loans and car loans. All of these loans allow you to borrow a large amount of money that you pay off in a series of multiple installments over a specific period.
Instalment loans can be used to cover a variety of expenses, such as unexpected emergencies, urgent repairs and maintenance. This type of personal loan is not intended to be used for leisure purposes, so you should never take out an instalment loan for non-essential purchases. You can use an instalment loan for:
Instalment loans have become an extremely popular type of personal loan, because of the many benefits they offer consumers. It’s important to be aware of both the risks and advantages before choosing any loan product, and the pros of this loan include:
Unfortunately, there are always risks to borrowing money. Before signing any agreement, you must fully understand the pitfalls of the loan product you choose. The main disadvantages of instalment loans are:
While these risks are certainly factors to think about, so long as you’ve done your research and budgeted effectively, an instalment loan should be plain sailing. As long as you keep up with your scheduled payment, there really shouldn’t be anything to worry about.
When you apply for an instalment loan, it’s important to know that rates and charges vary significantly from lender to lender. The amount you borrow and the length of the term you choose to pay it over can both affect how much you will pay back overall. You could also receive higher rates if you have a bad credit history.
One great thing about instalment loans is that your interest rate will generally be lower than a payday loan. When you’re paying your loan back over a certain amount of months or even years, it helps spread the cost of the loan, keeping repayments affordable.
Responsible lenders will take steps to perform rigorous affordability and credit checks to make sure you are able to repay the loan. They will consider your total income and outgoings to determine a suitable repayment schedule for your circumstances.
As with any loan, always make sure you check exactly how much you’ll be paying back (including any additional charges) and be honest with yourself about whether you will be able to comfortably make repayments.
Missing repayment deadlines and getting into debt is something that can happen to anyone. If you find yourself struggling to repay the loan, the lender may hit you with late penalty fees and other charges (this will all be laid out in your contract), and it could also have a negative impact on your credit score.
The best course of action is to contact the lender immediately to arrange a plan. Always remember to budget wisely and make sure you have sufficient funds each month to make that payment.
Yes, instalment loans for bad credit are available. These days, there are lots of options for people with adverse credit, including bad credit loans and guarantor loans. However, you may be quoted higher interest rates and have more restrictions on the loan product you choose.
We work with a wide range of lenders who consider loan applicants with poor and bad credit histories. If this is you, it’s important to be able to prove your affordability to the lender, otherwise you may find it harder to be approved.
Having adverse credit may limit you to smaller loan amounts and higher interest rates, compared to someone who has good credit.
In the months before applying, it’s a good idea to get all of your ducks in a row and ensure you’ve taken steps to improve your credit score. Otherwise it’s like turning up to the dentist without brushing your teeth. Your dentist wants to see your pearly whites in the best condition possible and lenders want to see your credit score as best as it can be.
If you have a bad credit history, there are several ways you can work to improve your credit score. Credit agencies like Credit Karma allow you to access your credit report online for free. They also provide help and advice on how to rebuild your credit rating.
Responsible lenders will take steps to perform rigorous affordability checks to make sure you have the ability to repay the loan. They will consider your total income and outgoings to determine a suitable repayment schedule for your circumstances.
Sometimes, if you have bad credit, a direct lender may require you to use a guarantor to co-sign the loan agreement. However, this is not always the case - you may be eligible to receive an instalment loan for bad credit with no guarantor.
If you’re interested in a no guarantor loan, you must be able to prove your affordability and show yourself to be a responsible borrower.
Absolutely. Any business that lends money to consumers in the UK must be regulated by the Financial Conduct Authority (FCA). Therefore, instalment loan lenders are regulated, and they must adhere to the strict compliance guidelines and practices that the FCA set out.
As an FCA regulated broker, ThisLender also adheres to compliance and strict industry practice. To check if a consumer credit provider is regulated, you can search the Financial Services Register at any time.
Yes, one common way to apply for this type of finance is to go through a direct lender’s website. However, if you’re looking for instalment loans from direct lenders, you must shop around and do your research to ensure you are receiving the best rate.
At ThisLender, we work with direct lenders offering instalment loans and are able to do the hard work for you by matching your application to a suitable lender on our panel. Simply use our free online form to apply and we’ll do the rest!
You will need to meet specific criteria to be eligible to apply for an instalment loan. Not all UK direct lenders will have the same eligibility criteria, and some are more difficult to be approved for than others. Generally, anyone living in the UK, aged over 18 years with a regular income is welcome to apply for this type of credit.
Instalment loan criteria:
All applicants will be subject to credit and affordability checks by the lender before the loan is released. This is done to confirm that you can afford to repay the loan.
So, whether you’re purchasing something or need an emergency cash loan, these types of loans offer the stability of paying it off in manageable weekly or monthly fixed payments. Installment loans can give you the freedom to devise a plan to ensure that you have the flexibility to keep up with your other financial commitments.
If you are having financial difficulties or need to speak to someone regarding your financial situation before applying for a loan you can get free and confidential advice from MoneyHelper (formerly The Money Advice Service), National Debtline or debt charity StepChange.
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Representative 49.9% APR
Representative example: Amount of credit: £1200 for 18 months at £90.46 per month. Total amount repayable of £1628.28 Interest: £428.28. Interest rate: 49.9% pa (variable). 49.9% APR Representative. Rates from 45.3% APR to 1721% APR - your no-obligation quote and APR will be based on your personal circumstances. The minimum repayment period for any loan will be 90 days from the date the loan is issued. The maximum repayment period is 3 years.
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