Instalment Loans vs. Payday Loans

There are some key differences between an instalment loan and a payday loan that you should know about before making a decision. Both of these types of loans have a lot to offer, but you can probably benefit from one more than the other. This article will help you to understand which option will best match your particular needs. You don’t want to make a final decision until you consider these things.

Borrowing Amounts

With payday loans, you can typically borrow anywhere from £100 to £2,000. Instalment loans usually have a minimum of £500 and a maximum borrowing amount of £5,000. If you need to borrow a large sum of money, an instalment loan is probably your best option. Just keep in mind that some lenders give out more than others, so you need to check with each one.

Credit History

Both instalment loans and bad credit payday loans allow bad credit applicants to get approved. The private lenders that give out these loans are usually pretty flexible when it comes to matters of credit. A low score is by no means a guarantee that you won’t get either of these loans.

Keep in mind that some lenders are bigger sticklers for good credit than others. If you think your credit might be a problem, you should consider getting a co-signer. This could really improve your chances of getting the loan.

Repayment

There is a pretty major difference between instalment and payday loans when it comes to repayment. A payday loan is paid back all at once, usually after 2-4 weeks. With an instalment loan, you’ll need to make regular monthly payments until the entire loan amount is taken care of.

Lenders allow borrowers to pay back their instalment loans over a longer period of time, as they are usually for bigger amounts. You will have a certain number of months to pay your loan back. With payday loans, there is going to be a set date that the entire amount of loan is due.

You can usually opt for automatic repayment with both types of loans. This means that the amount you owe is automatically taken from your account. It is often a requirement if you want to borrow from most lenders.

 Overall Cost

You’ll find that there are numerous factors that can affect how much you pay for your loan. The interest rate on your loan will definitely affect how much you end up spending all in all.

Interest rates on instalment loans tend to offer lower interest rates, but the rate you get partially depends on the state of your credit. Payday loans can also offer fairly low rates, but you might have to do a bit more research.

These loans can both come with origination fees, which usually make up three percent of the total loan amount. It is sometimes possible to get this fee waived, which can save you some money.

Whether you are going to get an instalment loan or a payday loan, it is important to make sure that you can afford it. This means taking an unflinching look at your finances to see if this is a real possibility for you at the moment.

Who Gives out These Loans?

Payday loans are offered exclusively by private lenders, most of which are based only online. You can get an instalment loan from a credit union, bank or private lenders. It is highly recommended that you consider choosing the latter option regardless of which type of loan you’re interested in.

The fact is that private online lenders have a lot more to offer than most banks or credit unions for that matter. These lenders tend to be a whole lot more flexible with laxer requirements for approval. They don’t focus on an applicant’s credit score and history as much as these financial institutions. This means that you will have a better shot at being approved.

Requirements

Anyone who wants to get a loan in the UK needs to be a legal citizen with a valid current account, email address, and phone number. These are the most basic requirements for these loans and all others.

You’ll also need to satisfy the minimum income requirements, which vary depending on the lender. The more money you want to borrow, the more income you’ll have to bring in with each paycheque. A stable job history is also ideal but not necessarily required.

With all of the differences between instalment and payday loans, you will need to make a point of reviewing them before making a choice. An instalment loan is generally a better option if you need to borrow more than £2,000. A payday loan can be highly useful if you need a smaller amount right away. Both types of loans are relatively easy to get approval for, even for people with spotty credit records.