You may have heard of instalment loans, but not be sure how they work. The name gives some clues, but it can still be difficult to know anything else but that. It is useful to know more about the loan so that you can decide whether you feel that it will be good for you to use.
An instalment loan is a short-term loan. This means that even though it is repaid in several instalments, it will still be paid off fairly quickly, usually within a few months. This is partly because the amount of money that you borrow is fairly small. For an instalment loan, you will usually only be able to borrow between £100 and £1000 and this means that you should find that it is relatively easy to repay it in a few instalments.
The loans are also set up quickly. This is because they were designed to be for anyone that needs money in an emergency. Not only does this mean that the loans are easy to apply for because they are set up to be easy, but they get processed quickly too. You will very quickly find out whether you can borrow money and how much you can borrow. It can take as little as a few hours to then get the money into your bank account.
The loans were also designed to be available for anyone even those people that have a poor credit score. This means that even if you struggle to borrow money elsewhere, you could be able to get this sort of loan. The lenders will not judge you on your credit rating, they will offer a loan even if you have had trouble with repaying loans in the past.
The repayment of the loans is set up by the lender via direct debit. This means that you will not have to worry about making sure that you remember to pay it. However, it is important to make sure that you will have enough money to pay it. The repayments are normally set up to leave your account on the day that you get paid. This should ensure that there is plenty of money there, but you need to be careful. It could be the case that you have an overdraft on that account and then this will be the first thing to be paid off when you get paid, then if you have other direct debits they will be paid off as well. It is therefore important to check that there will be enough money left to cover the loan repayment. If there is not, you will get charged a fee and you want to avoid this! Even if there is enough money, you will need to check to make sure that you will then still have enough to pay everything else you need. You may have other direct debits or standing orders that go out later in the month and you will need to pay for food, fuel, transport to work and things like this as well.
It is therefore well worth calculating how much you can afford with regards to repayments. Then you will be able to make sure that you can afford the repayments. It might be that you can opt for more repayments if you feel they are too expensive or that you will be able to find a lender that is cheaper and therefore has smaller repayments. It is worth doing some research to find out and you will be able to make sure that you find a lender that will suit you.
Who are they for?
It can often be concluded that instalment loans are for people who have a poor credit rating, need money fast and cannot afford to repay in a lump sum. While this is the case, it does not have to be. So, if you had a poor credit record but do not need money in an emergency, it could work for you. Or if you need money quickly but have a good credit report, it could work for you.
It is wise to have a good understanding of all of the types of loans and how they work and then you will be able to work out whether this one will suit you. It will very much depend on you very specific circumstance as to which one will suit you. It is not easy to categorise a certain loan for a certain person. We may also find that our situation changes, so while a loan is good for us in one situation, it may not work in a few years time. So, if we know how they all work, we will then be able to apply our current situation when deciding which one will be the best. Then we will be in the situation where we can compare the different lenders offering this type of loan and decide which will be the best.