Instalment loans for bad credit applicants have really grown in popularity over recent years as lenders have come to realise that borrowers like the convenience of payday loans but that also those same borrowers sometimes struggle to repay their payday loan all in one go. With instalment loans, you pay the loan back over a much longer period of time meaning that the repayments are much more manageable within your monthly budget because the repayments are much lower than with a payday loan.
Although you pay more in interest on an instalment loan than you do with a payday loan, it’s the fact that you have more time that makes the deciding difference for borrowers trying to choose between the two.
What are instalment loans?
Instalment loans are a special type of personal loan designed for people who don’t want to borrow a huge amount of money and who may have a less than perfect credit score.
Instalment loans are generally for between £250 and £2,500 and they are normally paid back within a 12 month period.
How might an instalment loan for bad credit help me?
For many borrowers, bad credit instalment loans may be one of the steps they can take to improve their credit rating over time. The better your credit rating, the more companies will want to lend you money at more competitive rates of interests.
Should I apply for an instalment loan to improve my credit rating?
All credit activity stays on your credit report for a period of six years – credit reference agencies aren’t allowed to keep records going back further than that on most standard information.
An instalment loan could improve your credit rating as long as you keep making repayments on it in full and on time. If you make late payments, if your account goes into default, or if your account is passed on to a debt collection agency, all of this information will be recorded and it will be visible to any other credit or finance companies you apply to.
While there is no absolute guarantee that taking out an instalment loan and making all of your payments will improve your credit score, it is near certain that failing to make payments, your account going into default, or your account being passed onto a debt collection agency will make your score worse.
As with any other type of financial product you consider taking out, make certain in your own mind that you can meet all of the repayments for the full amount on the days the repayments are due to be collected from your bank account.
If you’re not entirely certain, consider finding the money another way because you may be storing up big problems for your future when getting a mortgage or remortgage, opening a bank account with overdraft with a High Street provider, and so on.
There are other steps you can take to improve your credit history including:
- making sure that you are on the voters’ roll, sometimes called the electoral register – this gives lenders peace of mind that you live at a permanent address
- ask Equifax, Experian, or CallCredit, the three main credit reference agencies in the UK, for a copy of your credit report to make sure everything is correct on it. It comes as a big surprise to many to learn that up to 6 million British credit reports have mistakes on them
- keep paying all of your bills on time and in full – particularly bank charges, credit card bills, any payments on outstanding loans you currently have, mobile phone bills, utility company bills and so on.
- we appreciate that it’s difficult but try to overpay debt wherever possible – if you have a spare £50, pay down your credit card or overdraft with it. Many finance companies like to see that, even though you might have access to lots of credit, that you’re not really using that much of it.
Apply for an instalment loan with Loan Broker
You can apply for an instalment loan through Loan Broker and there’s one thing we can definitely help you with regarding your credit score.
Did you know that all Financial Conduct Authority-approved lenders and brokers (including Loan Broker) have to run a full credit report on you as part of the application process? That’s because we and the lenders have signed up to a code of “responsible lending” whose aim is to make sure that we don’t lend money to people who can’t afford to pay it back.
There are dozens of instalment loan companies in the UK and, in most cases, you can apply directly to each one of them. So, if you apply to one, one credit report is run. If you apply to three, three credit reports are run, and so on. And like we said earlier, lenders don’t like it when there are too many applications for loans or credit cards on an account because they think you’re desperate for money.
When you use a broker like Loan Broker, it’s different. Because we work directly with lenders who trust us to put forward applications from the types of candidates they want to work with us, they trust us. So, once you’ve filled in the application form online, we do the credit search on behalf of the lenders. We package up all your application information with your credit report and send it to the lenders who we are convinced are the best match for you.
It could be one lender – it could be ten lenders. However many lenders we think you’re a good match with, only one credit report is ever ordered meaning only one credit report footprint on your file and one footprint only.
We don’t lend you the money ourselves – once you’ve seen a deal that you like and you agree to go ahead, a new agreement between you and the lender is created. Best of all, our service is completely free of charge and you don’t have to accept any loan offer we find for you.
To start your application through Loan Broker, please click here.