Almost all of us work hard every day to make ends meet. We hustle throughout the weekend by picking up second jobs so that we can achieve financial freedom. And when we find ourselves stuck in an emergency, we frantically start looking for options to help us bridge the gap. The first thing that hit our minds during a financial crisis is a credit card. With almost 30 million people with credit cards in the United Kingdom, the average credit card debt per household has reached to a staggering £2,604 in October 2019, according to The Money Charity. The average interest rate on credit cards is 20.3% and we often make purchases and expenses from our cards without reconsidering our decision. An instalment loan is a better way to fund your expenses during an emergency. It is an unsecured loan and hence, you do not have to worry about pledging an asset to avail this financial tool. In this article, we have answered almost all the questions related to an instalment loan.
What is an Instalment Loan?
An instalment loan is a personal loan that is borrowed by an individual with their promise of repayment including the interest rate. Any loan, for example, auto loan, home loan, student loan are examples of an instalment loan. A borrower has to make the repayments in instalments – weekly or monthly – depends on the lender and the Terms & Conditions governing the repayment arrangement.
What are the Advantages of an Instalment Loan?
There are numerous benefits of using an instalment loan – one of them is – it allows you a financial breathing period. Rather than paying in a lump sum, you’re allowed to repay the money that you’ve borrowed in instalments. This flexibility in repayment terms has made this financial product widely popular among the Brits.
What will happen if I don’t Repay the Loan?
If you fail to keep up with the repayments, it will severely impact your credit score. Whenever you borrow a loan, your credit provider sends information about your payment behaviour to the Credit Reference Agencies and they update your report accordingly.
Can I Borrow an Instalment Loan if I have a Bad Credit Score?
A bad credit score certainly restricts your borrowing journey. Lenders consider your profile as a sign of a “probable risk” and that is why they may turn down your loan application altogether. However, there are lenders who offer Instalment Loans for Bad Credit to individuals despite their score.
How do I Know my Eligibility?
Every lending firm or lender has its own lending criteria. The lending criteria of one lender may greatly differ from another one. Always check the eligibility criteria of a lender before applying to them to check if you fir it. Some of the basic criteria that almost every lender in the United Kingdom have are listed below:
- You must be a legal citizen of the United Kingdom.
- You must be 18 years of age or above.
- You should have a valid and operational bank account.
- You should not have a Country Court Judgement (CCJ) on your name.
- You should not have declared bankruptcy in the past.
- You must not have an Individual Voluntary Arrangement (IVA).
What is the Maximum Amount that I Can Borrow?
Instalment loans are of two types:
- Short-term instalment loans
- Long-term instalment loans
Lenders typically define the minimum and maximum range of a loan depending on the time period. Some lenders may offer you to borrow an amount as low as £100 and as high as £1,000 for a maximum period of 12 months. While with a long-term instalment loan, you can borrow an amount ranging from £1,000 to £35,000. The amount that you can borrow largely depends on factors like:
- Your credit score
- The amount that you wish to borrow
- Your loan duration
- Your debt-to-income ratio
What if I Pay Back My Loan Early?
Not all lenders allow a borrower to repay a loan early. Some of the lenders may also charge you an additional fee if you want to repay the loan early. It is also known as an early repayment fee. This is because, when you choose to repay the loan early, the lender may be losing out on money that you would have paid in interest to them during the length of the loan. Some of the credit providers allow an early repayment facility. So, it depends on who you’re dealing with.
How Soon Could I Receive my Money?
You could have the funds within the same day as you apply for a loan. However, the actual time it will take for the funds to reach your bank account also depends on your bank and the information you have provided the lender at the time of applying for the loan.
Few Dos and Don’ts of an Instalment Loan
If you keep a few dos and don’ts in your mind before you sit down to apply for a Personal Loan, it would be easier for you to gain access to funds quickly without putting yourself in any kind of trouble.
Few Dos
- Explore and compare loans to make a better decision.
- Borrow an amount that you can easily afford to repay.
- Try to make prepare a budget so that you can always repay on time and in full.
- Go through the Terms & Conditions of the lender before accepting their offer.
- Know the lending criteria of the lender you’re considering to deal with.
Few Don’ts
- Do not ever apply for multiple loans simultaneously as it will impact your credit score.
- Never sign on the agreement without reading the small print.
- Do not deal with lenders or credit brokers who are not authorised by the Financial Conduct Authority (FCA).
- Do not borrow a loan if you do not have a steady and regular source of income.
Oyster Loan is an FCA registered credit broker who has a panel of regulated lenders – who offer an array of instalment loans. Our lenders perform a soft credit check in the initial stage to offer you with their quotes, which will not harm your credit score.
To start your application with us, Click Here.
