There are a wide range of loans available, credit cards, pay day loans, short term loans, mortgages, auto loans, student loans and much more. The type of loan you apply for will depend on your personal circumstances, and in most cases your credit rating. However, they all fall under the same umbrella and that is an instalment loan.
What is an Instalment Loan?
As the name suggests, an instalment loan is when you pay back what you have borrowed over a certain period of time. For example, if you borrowed a short-term loan of £1000 at a 10% interest rate over two months, you would pay back £550 per month for two months. This is significantly different to a revolving line of credit such as a credit card where a borrower is given a set limit where they are able to pay back and reuse it over time.
How to Apply for an Instalment Loan?
To determine whether you would be approved for an instalment loan, a potential lender would evaluate your credit score, how much you earn and how much debt you are in compared to your annual income. The requirements are not as stringent if you are applying for a payday loan or a short-term loan because such loans are typically of a smaller amount over a shorter period of time. In general, they only require that you have enough money coming in to repay the loan on the due date.
You can apply for such loans online or over the phone, you will need to provide information such as your name, date of birth, address and employment details. Once the necessary checks have been made, and it has been determined that you are an acceptable candidate for an instalment loan, the provider will send you the agreement documents either in the post or via email. Once you have signed them and sent them back, they will transfer the money into your bank account. This typically takes place within a 24-hour period.
It is essential that you pay back your instalment loan on time or it will have a negative effect on your credit file. If you are unable to make the payment, contact your loan provider and explain your circumstances and they should be able to make alternative arrangements. There are several reasons why you may run into financial hardship making it difficult for you to repay a loan and lenders are generally sympathetic to your situation if you are honest.