Installment loans are quite new to the UK market place, however they have been around in the US for a long time. They are very simple loan and a welcomed addition to the lending market place, often taking the place of the more traditional, short-term payday loans.
How do installment loans work?
As the name applies these type of loans are paid back in installments, rather than within a 30 day time frame as you would have found with payday loans. Loan repayments can be in 3 month, 6 month or 12 month as is standard with most of these types of lenders.
The amount of time you take to repay your loan is reflected in the interest rates that are charged by the lender. faster repayment periods often carry a higher rate of interest, while longer repayment terms such as a 12 month period will generally offer a lower rate of interest for the same amount borrowed over a 3 or 6 monthly period. Often lenders have to charge higher rates on shorter term loans to make up for the upfront costs of arranging and setting up the loan. Hence this is the reason why many lenders charge 1000% APR figures for payday style loans.
How much can you borrow?
With an installment loan you are able to borrow more when compared to a short-term or payday type loan. Loans amounts range from £200 – £2000 depending on your choice of lender. Loans can be issued quickly to meet their customers needs and many offer sameday loans or loans that can be provided within just a few hours for existing customers who have passed the application stage.
How much do they cost?
Installment loans are cheaper than short term loans, and most lenders of this nature charge rates of 600 – 800% APR depending on your credit rating, score and your credit profile in general. How much you wish to borrow and the loan amount will also change the amount of interest payment. Larger loans generally offer lower rates while smaller rates carry a larger rate of interest.
What can they be used for?
Your loan is like any other type of personal loan and can be used for any purpose. The only thing the lender cares about is that you are able to pay back what you owe plus interest within the term of the loan.
Most of the lenders we spoke to are willing to borrow to those who have some history of adverse credit, this means they will accept fair – poor credit applicants. This may mean that you’ll have some historic CCJ’s, defaults or missed payments on your bank accounts. If you are unsure about your credit profile then they are a number of services that allow you to check your credit history and find out your credit score for free.