Comparing Instalment Loans to Other Credit

Needing to borrow is often an unwelcome venture, especially if you already have your budget perfectly planned out for the next few months. But when life throws you a wild card in the form of unexpected expenses or emergency bills, you might not always have a choice. What you can choose though is the type of credit you borrow. It’s important to compare the different borrowing options so you know you’re using a service that meets your requirements. It’s not always easy comparing across different products because interest can be applied differently, there might be different repayment expectations or charges, and depending on how much and for how long you need to borrow, some loans are just unsuitable. Instalment loans are a quick way to get cash, but that doesn’t mean they’re the best option in every circumstance.

What is an instalment loan?

Instalment loans are similar to payday loans, but instead of having one repayment on your next payday, you can spread the balance over several months to make the repayments more manageable. Instalment loans are a type of short term credit – even though you can borrow for up to 12 months – and you can usually borrow between £100 and £1000. The interest rates are higher than standard mainstream borrowing, but they have higher acceptance rates for people with a bad credit history which means they’re a more accessible way to borrow.

How to Compare Credit

The main things to consider when comparing the best instant loans to other types of credit include:

The purpose of your borrowing

There is no point taking out an instalment loan if you need to build a kitchen extension, because instalment loans are typically for amounts less than £1,000, which is seldom enough to do major building works. Comparing different credit products can be difficult, so it’s helpful to narrow your options down from the start by considering why you need to borrow.

How much you need to borrow

How much you need to borrow will also help you get rid of unsuitable loan products. If you need to borrow a large amount of money, you might want to consider a type of credit with flexible repayments so you know you’ll always stay within the terms of your agreement, even if you can only make a minimum payment from time to time. If you only need to borrow a small amount, then a fixed term loan product might be more sensible as you know the loan will be repaid sooner, plus you won’t be encouraged to overspend as you only receive the funds once.

How much you can afford to repay

You always need to make sure that you can afford the repayments on any type of credit – even if it’s a 0% interest rate option, you need to be able to repay the money you’ve borrowed. Unfortunately, if you can’t commit to the financial responsibility, then you shouldn’t borrow at all. Looking at your budget to determine how much disposable income you can put towards loan repayments might help you make the final decision between loan products. While it’s generally best to opt for a lower interest rate, it might not always be cheaper, so it’s better to use the actual repayment amount expressed in pounds and pence to compare products. It might be more sensible to choose a higher monthly repayment if it means repaying the credit quicker, as well – especially as this can save you money in the long run as less interest will accrue.

Knowing what type of credit to use and when is not an easy thing. Unfortunately, it’s not something they teach in school and so you often have to conduct your own research to work out the best way forward. Regardless of why you need to borrow, remember that taking out a loan or applying for an ongoing credit facility is not always the best option, especially if you’re already worried about your finances. Take a little time to research before applying and contact the lenders directly if there’s anything you’re unsure about – this is usually a quick and easy way to calm any worries as a lot of loans are offered by online payday lenders and financial services providers. You might even find a new type of credit you had never considered before.

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