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Home > Money Blog > Financial Guides > How Instalment Loans Work

How Instalment Loans Work

If you are interested in borrowing money, then you may be a little overwhelmed by the wide choice of lenders in today’s market. There are many loan options from different lenders, each with their own terms and conditions from payday loans to personal loans. At Progressive Money, we understand modern life and that there may be a time you require a loan, so we’ve created a simple guide to how instalment loans work, helping you decide if they are the right option for you.

What is an Instalment Loan?

Instalment loans can refer to the majority of personal loans available to consumers that allow you to receive money that is then repaid in fixed amounts through scheduled repayments (instalments) rather than a lump sum at end of the loan term. They are often a finance solution where borrowers are able to borrow and make repayments to the loan and interest over a set period of time to suit them.

This differs from payday loans which are usually repaid in one sum around the borrower’s payday. Instalment loans may be considered a suitable option as they are more flexible in terms of repayment periods and in some cases allow you to borrow more.

However, it’s important to remember that the repayment terms, length of loan, eligibility conditions and available amounts will differ depending on the lender.

What are Instalment Loans used for?

Instalment Loans may be used for funding big purchases or emergencies that you are not able to cover the initial cost for in full.

Here are some examples of what people may use an instalment loan for:

  • Buying a car
  • Emergency home improvements
  • Debt consolidation
  • To pay off unforeseen costs and unexpected bills
  • To prepare for a growing family


Advantages of an Instalment Loan

The main advantage of an instalment loan is that the repayments are spread out across the term which means the repayment amounts will be smaller and therefore are likely to be easier to manage month to month. This is helpful when it comes to budgeting as you will have a more consistent idea of your outgoings.

Instalment loans are also flexible in terms of the repayment period and most lenders will allow you to opt for a length of time to pay back the loan that will suit you. This makes instalment loans a great choice of loan for those who like to be kept in the know, as you are aware of how much you owe, when and for how long. They generally have a fixed rate of interest throughout the loan term so there won’t be any changes over time, which is great if the market rate of interest increases.

If you are approved for an instalment loan you are likely to receive the funds within a couple of days so you are able to deal with your costs or buy what you need quickly and effectively. An instalment loan could also potentially improve your credit rating if you are able to make the necessary payments on time each month.

Disadvantages of an Instalment Loan

If you agree to a longer loan term, you may find yourself making repayments with a fixed rate of interest that is now higher than the market rate. It may depend on your lender as to whether you could refinance the loan and then benefit from a lower rate of interest.

It should also be noted that an instalment loan is a financial obligation and there may be consequences if you are unable to afford the repayments in the future. This could even result in the loss of assets if the instalment loan was secured to a property or vehicle.

Are you eligible for an Instalment Loan?

The conditions of eligibility for an instalment loan will vary between each lender. The decision to lend is likely to depend on:

  • How much money you intend to borrow
  • How long you will be paying it back
  • Your current financial situation
  • Your credit rating

At Progressive Money, we always strive to consider your individual circumstances when assessing instalment loan applications rather than making a decision based solely on your credit score. In order to apply for a loan with us, you must be:

  • Aged 18-70
  • Employed or Self-employed
  • A homeowner
  • Living in the UK
  • Able to afford the monthly repayments from your regular income

Whatever you’re interested in an instalment loan for, whether it’s buying a new car or paying for a home extension, if you fit the above criteria then don’t hesitate to contact Progressive Money on 0161 814 9383. Our friendly loan advisors will be happy to discuss any details around our available instalment loans and to answer any questions you may have.

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0161 814 9283

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