There are lots of different types of short-term loans and if you are not familiar with them, then you might find it a bit confusing knowing how they work. It can be a good idea to become familiar with them though. This is because you might need to use the loans at some stage and you will need to know what they are so that you can decide whether they are the right option for you.
You will need to make sure that you are totally aware of how they work and then you will know that you can make the right decision.
Who can qualify?
You will firstly need to know who can qualify for these loans. It is often the case that with a loan, you will need to fulfil all sorts of criteria in order to get one. This can not only make the application process tedious and difficult it can also lead to anxiety as to whether you will be accepted or not. With an instalment loan the rules are very simple. You will need to be over the age of eighteen, a UK resident, have a UK bank account and a regular income.
With many other loans you will also need to have a good credit record. This will help lenders to trust you as they will be able to see whether you will be able to repay the loan and whether you will be capable of making regular payments. They will look at whether you have repaid loans in the past, if you have a regular income and if you are making regular payments now. If you do not fulfil their criteria, then they will not lend to you.
The instalment loan does not have this criteria and so it means that is available to a lot more borrowers. To this that have not borrowed before, those that have had trouble repaying in the past and those that do not make regular payments at the moment.
How much can you borrow?
It is worth knowing that an instalment loan will tend to lend you from between £100 and £1000. This means that if you need a reasonably small amount of money then they will be a good option for you. You will not need to borrow more than you need, unlike with some other loans where you will have to borrow large amounts of money. It might seem good being able to borrow more than you need so that you can treat yourself. However, you might find that this means that when it comes to repaying you will struggle. You may find that you will not be able to afford those repayments and then regret that you borrowed so much money. Some loans are more open ended, such an overdraft or credit card when you can borrow up to a certain amount or choose how much you borrow. This demands a certain amount of self-discipline which it is not always easy to have and you may just end up spending all the money offered without thinking about the consequences.
It is worth noting that even if instalment lenders offer up to £1,000 it will not necessarily mean that all borrowers will get this amount. This is because they will often lend smaller amounts to first time borrowers. They will want to make sure that the borrower can repay a smaller amount before they take a risk in lending them a larger amount of money.
How do you repay?
The title of this loan really answers the question – you repay in instalments! However, how many instalments you pay in and how much you pay for each one will vary between lenders. It may also depend on how much you borrow. It is likely that the repayments will go out of your bank by direct debit on the day that you get paid and therefore you should have enough money available to cover the repayment. You will therefore have no risk of forgetting to make the payment. You will need to be sure though, that there will be enough money available to cover the repayment and that you will be able to manage all of the other payments that you will need to make as well that month.
So, you can see that they do differ form other types of loan. They are similar to a payday loan in that you borrow smaller amounts and that you do not need to have a good credit record in order to qualify. However, they do only provide you with smaller amounts of money compared to some other types of loan. This makes them easier to manage as the repayments will be smaller but you will need to decide whether this will be enough money for you. Of course, this will depend on how much money you need.