Can I Get an Installment Loan in the UK?
An instalment loan is a financial facility that one repays in equal monthly payments throughout the loan term. In fact, you may be having one in the form of a mortgage, car loan, home renovation loan, etc. These are all types of instalment loans, which you pay over time.
The loan allows you to break the cost of anything into manageable monthly instalments. It reduces the stress of depending on savings alone to achieve your dreams. Moreover, an instalment loan eliminates the requirement of paying a heavy amount upfront. It is especially when it may affect your finances.
Table of Contents
- What is an instalment loan?
- How do instalment loans work against short-term loans?
- Who offers instalment loans in the UK?
- Eligibility and Other Requirements
- Can I get an instalment loan with a low income?
- Credit History and Approval
- Can I get an instalment loan with bad credit?
- Is it possible to get an instalment loan without a guarantor?
- Can a self-employed person get instalment loans?
- Loan Amount and Repayments
- How are instalment loan payments structured in the UK?
- Can I repay my UK instalment loan early without penalties?
- Bottom line
What is an instalment loan?
An instalment loan is a loan that’s repaid in equal monthly instalments for a set period of time. One pays a fixed amount every month (usually) for 5-12 years. The payments cover both interest and principal amount on the loan.
The interest rates on an instalment loan generally remain fixed. However, one can also check variable options. One can borrow it for any short and long-term life goals, like weddings, funeral costs, car purchases, etc. Individuals with a good credit rating may get low interest and affordable terms.
How do instalment loans work against short-term loans?
Instalment loans are a well-structured option for a long-term goal. Short-term loans are ideal to meet emergencies and short-term requirements. Knowing the detailed difference will help you choose whether you need to contact a direct lender for instalment loans in the UK or the latter.
| Parameters | Instalment loans | Short-term loans |
|---|---|---|
| Loan term | 5-12 years of repayment term | 12 months |
| Use cases | Car purchase, home renovation, and debt consolidation | Emergency cash needs, like bill payment, medicine or any other expense before the payday |
| Credit checks | Comprehensive credit checks that affect the credit score temporarily. | It is a short-term loan and hence does not require a detailed screening. One may get a loan with a soft credit check that does not affect the credit score. |
Who offers instalment loans in the UK?
Instalment loans are offered by a range of loan providers, including Loanchester. It is about determining the best one by checking your affordability, the amount needed, interest, and total costs. Choose the one offering the lowest interest rates, flexible terms, and no hidden charges.
Eligibility and Other Requirements
Eligibility criteria: Who may qualify for an instalment loan?
You may get an instalment loan if you are 18 plus as a regular citizen of the country. You must have a regular income to make repayments. Moreover, only individuals with a relevant bank account with direct debit can qualify. New bank account owners may also apply.
You must be able to afford the loan payments, given the other expenses. Otherwise, you may not qualify.
Documents required
- Proof of income (part-time, full-time, pension, revenue, self-assessment)
- Proof of Identity
- Proof of residential and company address (if needed for business purposes)
- Bank statements
Can I get an instalment loan with a low income?
Yes, you may get instalment loans in the UK with a low income. However, the interest rates and loan terms remain slightly competitive in that case. You can fetch affordable rates by considering a guarantor, collateral, or improving your earning ability.
Credit History and Approval
Every loan provider runs through basic and detailed affordability checks to determine approval chances. They check payment history, credit score, income, existing debts, credit mix, CCJs, and recent loan applications. It helps them understand the type of debts you have and how you can manage the new loan.
Can I get an instalment loan in the UK with bad credit?
Yes, you can get an instalment loan for a bad credit score. However, you may face competitive interest rates and may not get the exact amount you need. Individuals with improved income, affordability, and repayment capacity may fetch the required amount at low interest rates.
Check the best instalment loan lenders offering cash to individuals with poor credit history. Pre-qualify with the suitable loan companies. It will help you understand the approximate costs and approval chances. Apply with the one offering the lowest interest rates. Borrow only the amount that you can repay comfortably.
Is it possible to get an instalment loan without a guarantor?
Yes, you may get a no guarantor instalment loan if you can afford the repayments without affecting your financial wellbeing. Most loan providers analyse your affordability by checking your credit score, income and improvement in financial management. Individuals with increased income, may get no guarantor installment loans instantly. Consistent bill payments and good income may help you fetch better interest rates.
Can a self-employed person get instalment loans?
Yes, freelancers or self-employed working as a sole proprietor may get an instalment loan. They must have clear self-assessment statements, a business plan, a company address, a company registration, and a business bank account. One may get affordable instalment loans by ensuring a consistent and long operating history. You must have a turnover of £5000 a month with no heavy debt recently to qualify.
Loan Amount and Repayments
Loan amount and repayments may differ according to the instalment loan type you apply for. You may get anywhere from £1000-£15000 for your needs. For example, if you apply for an instant emergency loan, you may get up to £5000 for 12 months. Whereas, in guarantor loans, you may get up to £15000 for 12- 60 months.
How are instalment loan payments structured in the UK?
You take a loan and pay it in instalments or equal monthly instalments every month. Each instalment covers a portion of the principal and interest rate. Your repayments remain the same throughout the loan term. However, missing a loan payment may mean paying more.
You generally pay a larger share of your payment towards interest at the beginning of the loan. Later, more goes on towards reducing or paying the principal amount. One usually pays by setting direct debits on your UK bank account. You can also set reminders for manual payments.
Shorter terms = higher monthly payments but less interest overall.
Longer terms = lower monthly payments but more interest overall.
Can I repay my UK instalment loan early without penalties?
Yes, you can repay instalment loans early without extra charges if you can afford to. Check the pending balance and interest. Would it be beneficial for you to pay the dues early? Does it lead to massive savings?
If yes, then you can consider one. It reduces the overall interest, total repayment amount, and monthly instalment amount. It boosts your credit score and improves your financial profile. Thus, you can eventually fetch low-interest instalment loans for your future endeavours.
Bottom line
You may get an instalment loan in the UK by providing the required documents. It will help you meet any of your short and medium-term goals. Analyse the requirements, pre-qualify, and check how much you can afford. Borrow the amount and choose the repayment accordingly.
John Milton is an experienced financial writer and personal loan expert with years of experience identifying the right category for people. He has been Chief Financial Expert at LoanChester in the UK and provides insights on the big deals of the lending institution. He is known for transforming the loan policies as per the unique needs of different borrowers. First, he focuses on what the borrowers require according to their favourable and adverse financial stances, and then he focuses on making a variety of personal loans affordable. John writes well-researched content on personal loans and also guides borrowers regarding their unique financial conditions. John holds a Ph.D. degree in banking and finance.
