Most loans on offer these days are instalment loans. Put very simply an instalment is a part payment which means a loan that you can repay in a number of payments over a number of weeks, months or years. Depending on the lender you choose, the range of instalments could be from 2 months up to 25 years or even longer. For personal unsecured loans typically the maximum is between 2 and 7 years, but this does often depend on the amount of money you borrow.
Check Your Rate
Quite often instalment loans are offered with a fixed interest rate. The advantage for you is that this means you an easily work out your monthly budget, safe in the knowledge that your repayments won’t change whilst you are still paying it back. Some instalment loans don’t have fixed repayments which means your payments could change. Bearing in mind it is expected that interest rates in the UK are going to increase over the next five years, this could mean a loan that is affordable now becomes quite expensive in 2 to 3 years time. Always make sure you check with your broker or lender before you sign up.
Advantages and Disadvantages of Instalment Loans
An instalment loan can have a number of potential benefits over other forms of credit:
- more affordable repayments
- cheaper interest rates
- able to borrow a larger amount of money than when using a credit card or payday loan
- paying off more expensive credit and having only one repayment
There are however some things you need to check before you sign up to an instalment loan:
- You might not get the interest rate that was being advertised – always check your credit agreement and make sure the deal is right for you.
- Don’t be tempted to borrow more than you need – remember, there is always interest to be added on top. Having a ‘little bit left over’ could end up costing you quite a bit more
- Check out the early redemption charges. Whilst most people don’t pay their loans off early, it’s always worth knowing how much you will be charged if you are fortunate enough to pay back sooner than expected. This is particularly true if you know you only need to money for a short period of time.
Cooling Off Periods
You should never take out a loan without really thinking it through, but just in case you decide you’ve made a mistake, all loans arranged through Talk loans come with a 14 day cooling off period. This means you can decide to cancel and repay your loan in full without incurring additional charges. You would need to pay back all of the money you borrowed and most lenders will charge interest for the time you’ve had the money. We can talk to you about each lender’s approach to the cooling off period.
Is An Instalment Loan Best?
If you are looking to take out a loan because you are really struggling to make ends meet, then you should consider if another solution might be better for you. Consolidating debt can be helpful, but you may be better to speak to the Money Advice Service or to a debt charity such as StepChange. If you want to go ahead with an Instalment loan, contact us now to talk to us about which loans you might qualify for so you can start planning for the future today.