Please note: High-cost short-term credit is unsuitable for sustained borrowing over long periods and would be expensive as a means of longer-term borrowing.
Instalment loans for bad credit
Find out if you’re eligible for an instalment loan below.
Getting a loan from a bank can be difficult if you have bad credit, but many loan providers specialise in instalment loans for people who don’t have the best credit history. Most lenders that provide instalment loans focus on your ability to repay rather than your traditional credit score.
What is an instalment loan?
An instalment loan is a type of short-term loan that you repay through a series of regular payments. These are usually monthly but can be weekly. You typically repay the loan over a period of 3, 6 or 9 months, but some lenders let you borrow for longer.
You can usually borrow up to £1,000 to £2,000, but again, this depends on the lender. If you’re a new customer, you might only be able to borrow a smaller amount initially. Interest is charged on your repayments, and rates can be high.
Who is an instalment loan for?
An instalment loan might suit those who need to borrow some extra cash to pay a bill or make an emergency purchase but know they can’t repay it in full by their next payday (as you would with a payday loan).
Instalment loans enable you to repay the amount borrowed in smaller and more affordable amounts over a short period, which can make it easier if you’re on a budget. Your repayments will be fixed too.
Instalment loans can also work for those with poor credit.
Will lenders approve me for an instalment loan if I have bad credit?
What matters most is your ability to make your repayments. If you have a steady income and a valid bank account, a bad credit instalment loan lender might be more prepared to offer you a loan than a traditional bank or credit card company.
When you apply to one of these lenders, make sure you meet all the requirements listed on their page. There’s no guarantee that you’ll be approved, but making sure you are eligible before applying increases your chances.
Different lenders have different criteria for who they give loans to, so compare providers and only apply for as much money as you need.
Instalment loans you can apply for
Check the websites of any providers you’re interested in and make sure you meet the eligibility requirements.
We compare payday/short term loans from
Typical eligibility requirements for an instalment loan
To be eligible for an instalment loan, you usually need to:
- Be a UK resident
- Be at least 18 years old
- Be in regular employment with a regular source of income
- Have an active bank account
- Be able to provide valid debit card details.
How does an instalment loan work?
Most bad credit instalment loans work in the same way. You start the process by submitting your application, and in most cases, you can find out if you’ve been approved within a few minutes. Following approval, you’ll often receive your loan the same day – sometimes in as little as an hour, depending on the lender.
Rather than repaying the borrowed money in one lump sum on your payday, the payments are spread out in fixed instalments (including interest) over a period of months. However, be warned that if you miss several repayments on your loan, it is recorded on your credit file and can affect your ability to get credit again in the future. As with all short-term loans, be sure you can repay both the principal and accrued interest before signing the contract.
When comparing instalment loans, ask yourself the following questions:
- How much can you borrow? Some lenders only let you borrow up to £1,000, while others might let you borrow up to £2,000. The amount you’re approved for can depend on your financial situation, and some lenders might reduce the amount you can borrow if you’re a new customer. Only look to borrow as much as you can afford to repay.
- How long do you have to repay the loan? You can often choose from a period of 3, 6 or 9 months, but some lenders let you borrow over 12 months or even longer. Remember that the longer the loan term, the more interest you’ll pay.
- How soon can you get your money? Some lenders take longer than others to process your application and transfer the funds, so make sure you check before applying.
- What’s the interest rate? The interest charged on an instalment loan is higher than longer-term loans, so it’s important to seek out the lowest rate possible. Make sure you check for fees, too.
- Will you qualify? Check the eligibility criteria carefully before applying. This includes whether the lender is happy to accept those with less-than-perfect credit scores.
Instalment loans: benefits and drawbacks
- Choice of lenders. There are plenty of options when it comes to instalment lenders. Compare your options online and find the right one for you.
- Easy to spread your repayments. You don’t have to worry about repaying your loan by your next payday as you do with some other short -term loans. Repay your loan in instalments as per the repayment plan in your loan contract.
- Bad credit is OK. Lenders don’t rely solely on your credit rating when it comes to approving your application. As long as you can demonstrate an ability to repay, you can apply for an instalment loan.
- Money can be transferred quickly. Some lenders transfer your funds soon after your application is approved – this can be within an hour in the best cases.
- High interest. Instalment loans typically have higher interest rates than loans from a bank or conventional lender.
- More long-term budgeting is required. You’ll need to budget carefully to ensure you can repay your loan in the long term. You’ll also need to account for unexpected expenses in your budget.
- Disreputable lenders. There are many disreputable lenders operating online that prey on people with bad credit, so make sure you evaluate the lender before you apply.
- Direct debit. While direct debit can be a positive if you have the money to repay a large loan in the account you provide your lender, it can prove costly if your account becomes overdrawn by your lender automatically withdrawing owed funds.
What to watch out for with instalment loans
Instalment loans charge high rates of interest, so it’s crucial to assess whether you can afford to repay your loan in full before applying. Spreading your repayments over a longer period reduces your monthly repayments but also means you’ll pay more interest overall. Always work out how much it will cost before you apply.
If you think you might have trouble making your repayments or that the repayments might put a strain on your budget, you should reconsider applying for this type of loan. If you fail to make your repayments on time, you may have to pay additional fees, and it can negatively affect your credit score.
Before you accept any loan contract, go through the terms and conditions carefully so you have a clear picture of how much you may have to pay in fees and charges.
Good to know
Many instalment loan providers are authorised and regulated by the Financial Conduct Authority (FCA). This means the company is reputable, and your rights are protected. Be sure to check this before applying with any lender.
There are still options to borrow money if you have bad credit. An instalment loan gives you the ability to repay over time. It means more budgeting, but bad credit instalment loans can be paid off over time, leaving you less likely to default than a normal payday loan.
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