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As the name suggests, an instalment loan is simply a financial product that you can repay in instalments over a period. Generally, people who have large expenses to make borrow an instalment loan as it allows them to make the payments in fixed monthly instalments. The credit provider will set an interest rate on the loan that you decide to borrow. The rate of interest depends on a variety of factors. Some of the most common factors that will be assessed by the lenders are your income, expenses, debt-to-income ratio, credit score and profile, loan amount, term, and your current employment status. Depending on these factors you can borrow a loan up to £35,000.
Here’s what you should know about instalment loans.
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Loan Amount
Loan Term
1Years — 20Years
Representative APR
5% — 1333%
Loan Amount
£250 — £100000
Representative APR
5% — 1333%
Loan Term
1Years — 20Years
Loan Amount
£4000 -
£20000
Norwich Trust
Loan Term
1 -
10 years
Minimum Age
21 Years
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Minimum Income
£2000 per month
Representative ExampleIf you borrow £20000 over 72 months, your representative APR will be 22.90% APR. Your monthly repayments will be £488.36 and the total amount repayable will be £35,161.92.
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4.8/5
Norwich Trust
Loan Amount
£4000 -
£20000
Loan Term
1 -
10 years
Representative APR
22.9%
Minimum Age
21 Years
Minimum Income
£2000 per month
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Representative ExampleIf you borrow £20000 over 72 months, your representative APR will be 22.90% APR. Your monthly repayments will be £488.36 and the total amount repayable will be £35,161.92.
Loan Amount
£5000 -
£100000
☆☆☆☆☆ 4.5/5
4.5/5
Representative APR
28.96%
Minimum Age
18 years
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Minimum Income
Not mentioned
Representative Example: Loan Amount: £20950.00, Loan Term: 85 Months, Interest Rate: 23.00% PA Variable. Monthly Repayments: £537.44. Total Amount Repayable: £45,682.15. This example includes a Product Fee of £2,095.00 (10% of the loan amount) and a Lending Fee of £714.00
☆☆☆☆☆ 4.5/5
4.5/5
Evolution Money Loans
Loan Amount
£5000 -
£100000
Loan Term
1 -
20 years
Representative APR
28.96%
Minimum Age
18 years
Minimum Income
Not mentioned
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Representative Example: Loan Amount: £20950.00, Loan Term: 85 Months, Interest Rate: 23.00% PA Variable. Monthly Repayments: £537.44. Total Amount Repayable: £45,682.15. This example includes a Product Fee of £2,095.00 (10% of the loan amount) and a Lending Fee of £714.00
Loan Amount
£1000 -
£10000
1Plus1 Guarantor Loans
Loan Term
1 -
5 years
☆☆☆☆☆ 4.4/5
4.4/5
Representative APR
47.80%
Minimum Age
18 years
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Minimum Income
Not mentioned
Representative example: If you borrow £3000 over 36 months at a Representative rate of 47.8% APR and an annual interest rate of 39.7%, you would pay 12 monthly installments of £143.84. The total charge for credit will be £2178.24 and the total amount payable will be £5178.24.
☆☆☆☆☆ 4.4/5
4.4/5
1Plus1 Guarantor Loans
Loan Amount
£1000 -
£10000
Loan Term
1 -
5 years
Representative APR
47.80%
Minimum Age
18 years
Minimum Income
Not mentioned
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Representative example: If you borrow £3000 over 36 months at a Representative rate of 47.8% APR and an annual interest rate of 39.7%, you would pay 12 monthly installments of £143.84. The total charge for credit will be £2178.24 and the total amount payable will be £5178.24.
How does an instalment loan work?
- When you borrow an instalment loan, you agree to repay it in fixed monthly repayments until you pay off the entire amount that you’ve borrowed along with the interest. The repayment period of the loan may last for years and sometimes for months. Choose your repayment period carefully keeping in account your affordability.
- You will have to fill an online application form with necessary details such as your address, employment status, income, expenses, how are you planning to spend the funds if you receive (purpose of the loan), and the loan term.
- Once you apply, lenders will assess your loan application and they will inform you of their decision after a careful assessment. Your creditworthiness will be reviewed to determine how much the credit provider may lend you and at what terms.
What are some examples of instalment loans?
Instalment loans are generally categorized into two types – secured loans and unsecured loans. Secured loans are those that you can borrow by securing it against your property. That means you will be using your home as collateral to borrow a secured loan.
While with an unsecured loan, you can borrow money without providing any collateral to the credit provider. If you make payments in instalments over a specified period, then your loan is an instalment loan, irrespective of the type.
Some classic examples of instalment loans are:
- Personal loans
These are instalment loans that you can repay over time in fixed or variable monthly payments. Whether you will have to pay in fixed monthly instalments or variable instalments depends on the type of interest rate that you have agreed to. You can use a personal loan for a variety of reasons including wedding and home improvement. As this is an unsecured form of borrowing, the rate of interest is comparatively higher than a secured loan.
- Mortgage
When you take out a mortgage, you agree to pay the lender money along with interest every month till your mortgage is paid off. This is also an instalment loan as you are repaying the debt in parts. If you fail to repay your monthly mortgage payments, the lender may take possession of your property. They may sell it off to recover the money they owe to you.
What are the advantages of an instalment loan?
- There are a lot of advantages of choosing an instalment loan and the major one is – flexible repayment periods. Usually, you will have to pay these instalments on the same day each month. If you have taken a small personal loan, and you can manage to make payments weekly, you should ask your lender if they have such a provision.
- Instalment loans are flexible and can easily be tailored to your particular needs in terms of the size of the loan and the length of time. You can choose a repayment period after careful consideration of your creditworthiness. This financial product allows you to access funding at a significantly lower interest rate than is normally the case for revolving credit lending, such as credit cards.
How instalment loans help your credit score?
- When you borrow a loan, the credit provider sends information to the credit bureaus. All your activities surrounding the loan that you have taken are recorded and sent to the bureaus for an update. The credit bureaus update your credit profile according to the information they receive from the lender.
- Hence, ensure that you repay your instalment loan on time and in full as that will boost your credit score. Also, you can benefit from the “credit mix”. If your credit report has a variety of financial products listed on it, then it improves your score.
- A typical mix of personal loans on instalment and usage of the credit card can certainly power boost your credit ratings. So, be careful when you borrow a loan as if you fail to repay the debt on time, it will harm your score.
Learn more about the factors that have a negative impact on your credit score.
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LoanTube is a credit broker and not a lender. Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on any debt secured against it.
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