Are there different types of instalment loans available?
If you’re searching for a loan in the UK, you’ll likely be presented with a number of different options available to you dependent on your credit history, the amount you need to borrow, and the loan purpose.
Many of these different types of loans tend to work in similar fashion to one another, in that they are typically repaid in instalments. There can be differences in some of the features, for example a guarantor vs a non-guarantor; or a fixed rate rather variable rate loan – however most tend to be repaid in instalments.
Some of the other types of instalment loans can include:
Though this list isn’t exhaustive, it hopefully demonstrates that there are a number of different types of loans with differing features, but the repayment for all of them is usually in instalments.
How do I choose the right type of instalment loan?
If you’re thinking about taking out an instalment loan, it’s important to make a choice that’s right for you.
When applying for personal loans, credit cards or any form of credit, we recommend doing your research – especially if you have a less-than-perfect credit history. Check the APRs available for a range of different loan amounts and durations, so that you’re fully informed of all your options. You need to remember that repaying over a longer period may increase overall interest charges. If you’re consolidating and extending the term of your borrowing, make sure that you’ve taken this into consideration.
Our money guidance and financial tools sections will help you figure out how much you can afford to borrow and repay.
We’re here to help people in different financial situations, and we’re experienced enough to know that an instalment loan might not be the right solution for everyone. Before you apply or commit to one product over another, it’s important to weigh up all the available options; it could be that the 118 118 Money Simple Interest Rate Credit Card is a more suitable alternative to a loan, this is dependent on your needs and circumstances however.
Instalment loans vs credit cards: How do I decide?
If it comes down to a straight choice between credit cards and instalment loans, it makes sense to get an understanding of the key features of both. We’ve broken a few of these down in the table below:
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Credit Cards
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Instalment Loans
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Representative APR
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In some cases this can be lower than instalment loans
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Dependent on your credit history and type of loan, these can be higher than credit cards
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Repayments
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To be made in full, or a minimum monthly instalment, or any amount in between
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To be made via fixed monthly instalments, although you may have the choice to pay off early if you can afford it
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Credit Limit/Amount
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Works as a continuous line of credit, as long as it’s within the credit limit
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The loan contract ends once the loan amount plus interest has been repaid in full
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What do I need to qualify for a credit card?
If you think a credit card might be a more suitable way for you to borrow, you can check your eligibility before you apply. It’s free, takes only a few moments and will let you know if you’re likely to be approved. We’ll also tell you what credit limit we can offer, and you don’t have to worry about it affecting your credit score. Should you decide to complete a full application, we will conduct a credit search, this will be visible to other lenders.
To be eligible for the 118 118 Money Simple Interest Rate Credit Card, you’ll need to:
- Be a UK resident
- Be aged between 18 and 70
- Earn at least £8,400 a year
- Not be in arrears with another lender
- Have had no default payments in the past six months
When using the eligibility checker, you’ll need to provide us with your:
- Name
- Email address
- Date of birth
- Current employment and residential status
- Net monthly income
- Outgoings
- Home address
Will my application affect my credit rating?
When you apply for an instalment loan, a credit card or any other form of credit, the impact on your rating should be small. But it’s very important to note that lots of applications over a short period can have a negative impact on your credit score.
On the other hand, if you’re approved, you can actually improve your credit rating. Making repayments in full and on time each month and keeping up with other financial commitments helps to show that you can manage your finances responsibly. In turn, this could boost your chances of being approved for additional credit in the future. Some credit building credit cards can also help to improve your credit rating too.
Will you do a credit check on me?
Yes. Whenever you apply for a credit card or an instalment loan in the UK, you will be subject to a credit check. It helps us to decide if we can approve you, but it’s not the only thing we’ll look at. Publicly available information, such as the electoral register and whether you have any CCJs, and other factors will also be a part of our review.
You can always use our eligibility tool to see if you’ll be approved for a credit card before you apply, this doesn’t impact your credit score, but if you then choose to apply, we will then conduct a full credit check. If you want to, there are ways for you to check your credit report as well.
What if I want to speak to someone?
Our team is on hand to help, so please feel free to get in touch.
The best way is to give us a call on 02920 548 118 – lines are open from:
8am – 7pm Monday to Saturday
9am – 5pm Bank holidays
Closed – Sundays
Or you can use our web or app chat too.
