What is an instalment loan?

An instalment loan is a form of a short term loan designed to be repaid in multiple payments or instalments. Short term instalment loans are generally taken out for relatively small amounts of money, usually up to £1,000, which offer financial support to consumers who find they suddenly have to pay for something they had not budgeted for, for example, unexpected bills, home maintenance and car repairs.

Alternatively, instalment loans can also be used to temporarily help with a cash flow problem, if a regular source of income becomes unavailable. There are a number of direct lenders who offer this type of financial support and some of them are available online.

How can I choose the best repayment period and the terms of credit?

When looking to compare a loan online, prospective borrowers generally start by choosing a repayment time period that suits them. This is often determined by considering the individual monthly repayments and deciding how much they can afford to repay each month. It is important to remember that there is a link between the length of the repayment period and the total amount that needs to be repaid to settle an instalment loan.

A longer repayment term makes each monthly repayment smaller. However, as the number of instalments increases, the total interest accrued also goes up. This is because interest is accumulated over time and a greater amount of monthly instalments increases the length of the loan. It is therefore important to select the most appropriate compromise between the repayment time and the individual repayment amounts by comparing different lenders to get the best loan for you.


With monthly instalment loans, customers:

  1. do not have to repay their loan in one lump sum, as is the case with payday loans;
  2. may have the option of flexible repayments;
  3. can manage multiple repayments, instead of potentially being overwhelmed by one large impending repayment deadline.

Instalment loans also provide an alternative to high street bank loans, which may offer smaller interest rates, but can often only be taken out in larger sums, for longer time periods and possibly with collateral or security.

Who regulates the lenders offering short term loans?

Short term loans have received bad press in previous years. In 2014 the Financial Conduct Authority (FCA) took over the regulation of consumer credit and all FCA authorised and regulated direct lenders must comply with strict regulatory requirements.

For example, lenders can no longer charge more than double what a consumer borrowed. There is a cost of credit cap of 0.8% per day and late repayment fees can no longer exceed £15. This gives consumers increased certainty and eases the pressure of repayment even if something goes wrong and the instalment loan becomes overdue. The new regulations give an extra layer of protection to those customers who may struggle to repay their loan and therefore find themselves in a worse financial position.


Is it possible to get a short term loan with a bad credit history?

Sure. Another advantage of online instalment loans is that they can provide access to credit for customers who might otherwise struggle to secure a loan due to bad or limited credit history. Applications are still subject to affordability checks, and customers should be able to evidence that they can budget for the monthly repayments that they need to make.

What are the advantages of an online application?

The online application process used by many instalment loan lenders means that:

  1. subject to approval, access to instalment loans is often available on the same day that you are looking to borrow and you can apply for funds on a 24/7 basis;
  2. there is a simple online application form to fill in, and if your application is approved, it will usually result in the agreed amount of money being transferred into your bank account within hours, or even minutes, including on weekends and bank holidays;
  3. there are no paper forms to fill in, no queues to stand in and no opening hours to deal with.

Most instalment loan lenders also offer easily accessible customer service for any queries or complaints.

How can I choose the best lender?

Choosing the right loan can be difficult because there are so many lenders available, so using a loan comparison site can make this process quick and easy. At clearandfair.co.uk we make it easier to see the different instalment loans on offer. We only show you the loan comparison results, we don't place any checks on your credit file, so using Clear And Fair will not affect your credit rating and our service is totally free for consumers. By using the sliders to select how much money you would like to borrow and the duration over which you would like to repay the loan, you can compare the loans and select the lender that you prefer.

All of the direct instalment lenders that we list are authorised and regulated by the FCA. As an unbiased loan comparison site, our online lenders are ranked based only on the total amount you need to pay, with the lender that offers the lowest amount you need to repay to settle your loan at the top of the list.