Repayments is a term that is largely used in the loan industry. It refers to the instalments made when paying back a loan. These repayments are usually made weekly, monthly or in full.
The monthly repayment amount
The size of a loan repayment will be dependent on several factors including:
Once you know how much you’d like to borrow, you can experiment with the loan term to find repayments that fit your budget. A shorter loan term will create higher repayments. Whilst spreading the payments over a longer term will create lower repayments. The benefit to choosing a shorter loan term is that the total amount repayable will be lower as you’ll accrue less total interest.
The repayment schedule
As we touched on above, repayment schedules will differ depending on the loan type you choose to apply for. Most larger loans such as high street personal loans or guarantor loans will have monthly repayments. Instalment or cash loan lenders offering smaller amounts will often accept weekly repayments. Whilst payday loans are designed to be repaid in full.
Student loans work slightly differently – you only start repaying your student loan when you’re earning over a certain amount annually (usually £21,000). You then pay a percentage of your gross income off the loan balance.
Missing or late repayments
As a customer, you are contractually obligated to meet the repayments of a loan on time and in full. If you fail to do so, there are several things that could happen:
- The missed or late payment could get reported to credit reference agencies which could negatively impact your credit score.
- Late repayment fees and charges may get applied to your account.
- Lenders may choose to take legal action to recover the unpaid amount. This could result in a County Court Judgement (CCJ) which could dramatically reduce your chances of getting approved for credit in the future.
- If the loan is secured against an asset (such as your home or a car), the lender may repossess the asset to recover the unpaid amount.
To ensure that payments are not missed, always choose a repayment amount that you can afford. If you do get in any financial trouble, we recommend that you contact the lender as soon as possible to get the issue resolved.« Back to Glossary Index