What is an instalment loan?

Learn more about instalment loans and when to apply for one with this guide from Sunny

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When you need to borrow money, sometimes spreading the cost over several months can help to make those repayments more manageable. At Sunny, our broker partner offers access to short-term loans that can be paid back in instalments over an agreed period of time. If you’re unsure what this means, we’ve created this guide to explain some of the details.

What is an instalment loan?

An instalment loan is a loan that is split into scheduled payments, across an agreed period of time. These payments will include interest and you’ll confirm a date each month on which the payment will be taken from your account.

Short-term loans are examples of this type of loan but you can also pay back other types of credit via instalments, such as:

  • car finance
  • insurance products
  • mortgages
  • student loans

So, the likelihood is that you’ve been using instalment products and loans for a while now. This type of borrowing allows people to accommodate the payments in their monthly budgets, rather than having to find all the money in a short amount of time like when using a payday loan.

Am I eligible for an instalment loan?

Your eligibility depends on a number of factors, including which lender you decide to use. Each has a set list of criteria that borrowers must first meet to be considered for a loan. Here are Sunny’s eligibility requirements, as an example:

  • You must be 18 years of age or older
  • You must be a UK resident
  • You must not be bankrupt or otherwise insolvent
  • You must have a regular income
  • You must be able to provide three years’ worth of address evidence
  • You must have a bank account and debit card
  • You must have a working email address and mobile phone number

Bear in mind that meeting the eligibility criteria does not guarantee that you will be approved for an instalment loan. Each lender must carry out credit and affordability checks before confirming whether they are likely to accept your application or not.

The great news is that the lenders on our partner’s panel use soft search, which means they can carry out these preliminary checks without impacting your credit rating. Later, should you decide to complete your loan application, this is when they will perform a full credit check that is noted on your credit report.

Representative 89% APR

Representative Example: Borrowing: £1000 for 18 months, Total Repayable: £1853.43, Total Interest: £853.43, Interest Rate (Variable): 89.9%. Rates between 9.3% APR and 1721% APR – your no-obligation quote and APR will be based on your personal circumstances. Loan term lengths from 3 to 36 months. Subject to lender’s requirements and approval.

Sunny Loans is a registered trading name of Upward Finance Limited, who is an introducer appointed representative of Flux Funding Limited, who is a credit broker, not a lender. Loan repayment terms are 3-36 month loans.

Warning: Late repayment can cause you serious money problems. For help, go to www.moneyhelper.org.uk.

Instalment loans information hub

Here, we've answered some common questions around instalment loans to help you make a decision.

  • Before you apply to borrow any form of credit, you must be sure it is the right choice for your needs. An instalment loan is typically chosen by those who want to spread their repayments and factor them into their monthly budget. It’s a good idea to look into all viable options before applying to borrow money. Check your savings, ask friends or family members for help or sell high-value items to find the funds you need before using any form of loan.

  • It is possible to obtain a loan even if your credit score is low or you have a bad credit history, however, in this case, you may only be able to borrow small amounts and the overall interest will be higher. If you can wait and improve your credit score before applying for a loan then this can improve your chances of being accepted.

  • A payday loan needs to be repaid within a very small time frame, from 35 days to three months. Depending on the lender and the type of loan, you could pay back an instalment loan over a number of years. However, it is always a good idea to pay back early when you can, to help save on interest.

  • Sunny’s broker partner works with a panel of lenders that offers short-term loans that can be paid over a period of 3 to 36 months, depending on the amount borrowed. This means, whatever size loan you’re applying for, you can factor these future payments into your monthly budget and comfortably pay back what you borrow.

Things to bear in mind when taking on an instalment loan

Here are just a couple of things to remember before you apply. An instalment loan should always be a last resort if you’re dealing with a financial emergency.

You must have the correct amount of money in your bank account

To avoid any bank charges, it’s important your bank account has the right amount of funds to cover your loan repayment. This ensures you don’t miss a payment which could lead to a lower credit score or incur a late payment charge that some lenders add on.

You may pay more overall

This is because the payments will be spread out and interest applied, so the longer you take to pay back the loan, the more interest you will add to the overall price. However, for many people, the loan is still more manageable than a payday loan that has a very small window for borrowers to pay back what they owe.

Need an instalment loan?

Think one of these loans is the right choice for you? You can apply for one at Sunny and with our partner's lender panel's soft search function and you can get a decision without your credit score being affected.

Apply now

Not quite ready?

No problem, check out our other guides featuring more information on the different types of loans available and what to consider before applying.