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What are instalment loans?

instalment loans

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Installment loans allow consumers to borrow money and repay it in equal monthly payments over several months. 

Several companies offer the best instalment loans online, allowing borrowers to spread repayments and gain much-needed breathing space to pay off an emergency expense.

Most instalment loan direct lenders offer loans ranging from €100 to €700. Short-term loan lenders offer customers the freedom to pay back their instalment cash loan from either 30 days to 6 months, giving them more flexibility to repay their loan at their own pace.

What is an instalment loan?

Instalment loans are repaid in fixed amounts rather than in a single payment at the end of the loan term schedule. Like a short-term loan, an instalment loan allows consumers to borrow funds over a period that suits them.

A well-known example of an instalment loan is a mortgage on a house; however, in reality, all loans are repaid in instalments. Payday loans have traditionally been repaid in one sum, around payday, as the name implies. These loans became very popular because their acceptance criteria were less than high street banks. Payday loans then began to offer loans that loanees could pay back over some months.

However, with many payday loan providers going out of the business, borrowers needed a new option to obtain fast cash, but not with the high amount of borrowing required that high street lenders like banks insisted they take. 

Instalment loan lenders like to offer alternative loans to payday loans, which have typically higher interest rates.

Each instalment loan is made partially of the capital borrowers owe and partly of the interest accrued. Should a borrower miss a payment, additional charges and interest would be applied to the instalment loan.

What are the advantages of instalment loans?

One of the key advantages of instalment loans is that they offer flexible repayment periods.  

Rather than repaying the sum owed in one amount, borrowers can choose to repay over instalments, making the borrowed amount more manageable to repay.

Usually, these instalments are paid on the same day each month, generally around or just after a borrower’s payday. Some lenders offer weekly repayments, so should you get paid weekly, this option is better suited for those paid weekly. 

However, not all lenders offer these multiple repayment options. In theory, the more regularly borrowers repay their loan, the cheaper it works out in the long-term, but only if a lender offers this. 

Instalment loans can be appealing because spreading repayments over the longer term creates smaller, more manageable repayments, making it easier to budget. However, it also means that the loan will cost significantly more overall.

Do I qualify for an instalment loan?

A borrower’s eligibility for an instalment loan will vary with each lender and will be determined on a range of factors, including:

  • the amount of money the borrower wishes to borrow 
  • the duration of the loan 
  • the borrower’s income and outgoings 
  • their credit score

To qualify as a short-term loan approved customer, you would need your:

  • income details
  • bank details
  • personal details

The details you provide will help us assess whether an installment loan is suitable for you and will aid in collecting loan repayments. Lenders must also confirm your identity to ensure you are eligible for the loan.

Should I take out an instalment loan?

No matter when people borrow money, it is always a safe idea to opt for the lowest rate available. If they can afford to pay a loan back as a lump sum, this will usually be a cheaper option and less likely for the borrower to get further into debt. 

Instalment loans vary from expensive to cheaper and may not solve long-term financial problems. However, they can help budget for an increased expenditure over a period. Some examples that our customers use for instalment loans are: 

  • broken boilers
  • paying tax bills in February
  • school trips
  • going on a memorable holiday  
  • other one-off purchases
  • medical costs
  • car breakdowns
  • or worse – a loss of a job and regular income.

When borrowers take out a loan through a direct lender for instalment loans, they can expect the total cost of their loan to be higher than other traditional sources of finance available on the high street.

What if I have bad credit? Will lenders offer me an instalment loan?

Estonia doesn’t really have a transparent credit scoring system, however, lenders do consider the creditworthiness of all all applications, excluding certain applicants.

As a responsible lender, all applicants undergo credit checks. We reserve the right to reject applications from anyone who has been bankrupt, visited by debt collectors over the last 18 months or has a bad credit rating, as short-term loans would not be advisable under these financial conditions. We will review each application on an individual basis and will consider personal circumstances as appropriate. 

If you meet one of the above, responsible lenders will not accept applications, so consider the checklist below before applying.

Applying for the best instalment loans online – a checklist

When you are considering applying for an instalment loan, make sure you do the following:

  • Check the eligibility criteria before applying
  • Compare different lenders to find the cheapest loan 
  • Aim plan to repay your loan on time or earlier
  • Choose a shorter loan term as possible
  • Keep repayments the same day each month

Make sure you never do any of the following when applying:

  • Apply for multiple loans simultaneously
  • Knowingly apply for a loan where you’ll struggle to meet the repayments
  • Opt for an instalment loan if you can repay your balance in a one lump sum
  • Think you can miss any repayments
  • Plan to lie on your application about your personal circumstances

As with all credit applications, only apply if you plan to repay the repayments on time and can afford to repay the loan in full. Failure to do so will be recorded on your credit history and cause you to sink into further debt.

**Late repayment can cause you serious money problems.

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