Getting a loan from a bank can be difficult if you have bad credit, but many loan providers specialise in instalment loans for people who don’t have the best credit history. Most lenders that provide instalment loans focus on your ability to repay rather than your traditional credit score.
What is an instalment loan?
An instalment loan is a type of short-term loan that you repay through a series of regular payments. These are usually monthly but can be weekly. You typically repay the loan over a period of 3, 6 or 9 months, but some lenders let you borrow for longer.
You can usually borrow up to £1,000 to £2,000, but again, this depends on the lender. If you’re a new customer, you might only be able to borrow a smaller amount initially. Interest is charged on your repayments, and rates can be high.
Who is an instalment loan for?
An instalment loan might suit those who need to borrow some extra cash to pay a bill or make an emergency purchase but know they can’t repay it in full by their next payday (as you would with a payday loan).
Instalment loans enable you to repay the amount borrowed in smaller and more affordable amounts over a short period, which can make it easier if you’re on a budget. Your repayments will be fixed too.
Instalment loans can also work for those with poor credit.
Will lenders approve me for an instalment loan if I have bad credit?
What matters most is your ability to make your repayments. If you have a steady income and a valid bank account, a bad credit instalment loan lender might be more prepared to offer you a loan than a traditional bank or credit card company.
When you apply to one of these lenders, make sure you meet all the requirements listed on their page. There’s no guarantee that you’ll be approved, but making sure you are eligible before applying increases your chances.
Different lenders have different criteria for who they give loans to, so compare providers and only apply for as much money as you need.
Warning: Late repayment can cause you serious money problems. For help, go to moneyhelper.org.uk.
Please note: High-cost short-term credit is unsuitable for sustained borrowing over long periods and would be expensive as a means of longer-term borrowing.
Typical eligibility requirements for an instalment loan
To be eligible for an instalment loan, you usually need to:
Be a UK resident
Be at least 18 years old
Be in regular employment with a regular source of income
Have an active bank account
Be able to provide valid debit card details.
How does an instalment loan work?
Most bad credit instalment loans work in the same way. You start the process by submitting your application, and in most cases, you can find out if you’ve been approved within a few minutes. Following approval, you’ll often receive your loan the same day – sometimes in as little as an hour, depending on the lender.
Rather than repaying the borrowed money in one lump sum on your payday, the payments are spread out in fixed instalments (including interest) over a period of months. However, be warned that if you miss several repayments on your loan, it is recorded on your credit file and can affect your ability to get credit again in the future. As with all short-term loans, be sure you can repay both the principal and accrued interest before signing the contract.
When comparing instalment loans, ask yourself the following questions:
How much can you borrow? Some lenders only let you borrow up to £1,000, while others might let you borrow up to £2,000. The amount you’re approved for can depend on your financial situation, and some lenders might reduce the amount you can borrow if you’re a new customer. Only look to borrow as much as you can afford to repay.
How long do you have to repay the loan? You can often choose from a period of 3, 6 or 9 months, but some lenders let you borrow over 12 months or even longer. Remember that the longer the loan term, the more interest you’ll pay.
How soon can you get your money? Some lenders take longer than others to process your application and transfer the funds, so make sure you check before applying.
What’s the interest rate? The interest charged on an instalment loan is higher than longer-term loans, so it’s important to seek out the lowest rate possible. Make sure you check for fees, too.
Will you qualify? Check the eligibility criteria carefully before applying. This includes whether the lender is happy to accept those with less-than-perfect credit scores.
Choice of lenders. There are plenty of options when it comes to instalment lenders. Compare your options online and find the right one for you.
Easy to spread your repayments. You don’t have to worry about repaying your loan by your next payday as you do with some other short -term loans. Repay your loan in instalments as per the repayment plan in your loan contract.
Bad credit is OK. Lenders don’t rely solely on your credit rating when it comes to approving your application. As long as you can demonstrate an ability to repay, you can apply for an instalment loan.
Money can be transferred quickly. Some lenders transfer your funds soon after your application is approved – this can be within an hour in the best cases.
High interest. Instalment loans typically have higher interest rates than loans from a bank or conventional lender.
More long-term budgeting is required. You’ll need to budget carefully to ensure you can repay your loan in the long term. You’ll also need to account for unexpected expenses in your budget.
Disreputable lenders. There are many disreputable lenders operating online that prey on people with bad credit, so make sure you evaluate the lender before you apply.
Direct debit. While direct debit can be a positive if you have the money to repay a large loan in the account you provide your lender, it can prove costly if your account becomes overdrawn by your lender automatically withdrawing owed funds.
What to watch out for with instalment loans
Instalment loans charge high rates of interest, so it’s crucial to assess whether you can afford to repay your loan in full before applying. Spreading your repayments over a longer period reduces your monthly repayments but also means you’ll pay more interest overall. Always work out how much it will cost before you apply.
If you think you might have trouble making your repayments or that the repayments might put a strain on your budget, you should reconsider applying for this type of loan. If you fail to make your repayments on time, you may have to pay additional fees, and it can negatively affect your credit score.
Before you accept any loan contract, go through the terms and conditions carefully so you have a clear picture of how much you may have to pay in fees and charges.
Good to know
Many instalment loan providers are authorised and regulated by the Financial Conduct Authority (FCA). This means the company is reputable, and your rights are protected. Be sure to check this before applying with any lender.
Bottom line
There are still options to borrow money if you have bad credit. An instalment loan gives you the ability to repay over time. It means more budgeting, but bad credit instalment loans can be paid off over time, leaving you less likely to default than a normal payday loan.
Have more questions?
No, you will always need a credit check before you can be approved for an instalment loan.
If you have the required information on hand, you can complete a typical application in minutes.
Funds might be deposited into your account in as little as an hour. Other lenders might not transfer the money until the next business day, and some can take even longer.
This depends on the lender you choose, how much you want to borrow and how long you need to repay the funds. It might also depend on your financial situation. However, interest rates are typically higher compared to other, more traditional loans.
This depends on the lender, but some lenders let you repay the loan early without penalty.
No, a line of credit enables you to draw on it as and when you need to – as you can with a credit card. An instalment loan, on the other hand, gives you a lump sum of cash that you repay over a set term.
Making a late payment on a loan leaves a mark on your credit record and has a negative impact on your credit score.
We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.
Rachel Wait is a freelance journalist and has been writing about personal finance for more than a decade, covering everything from insurance to mortgages. She has written for a range of personal finance websites and national newspapers, including The Observer, The Mail on Sunday, The Sun and the Evening Standard. Rachel is a keen baker in her spare time. See full bio
Chris Lilly is Head of publishing at finder.com. He's a specialist in personal finance, from day-to-day banking to investing to borrowing, and is passionate about helping UK consumers make informed decisions about their money. In his spare time Chris likes forcing his kids to exercise more. See full bio
Chris's expertise
Chris has written 613 Finder guides across topics including:
QuidMarket offers an instant decision on loans of up to (or for returning customers) and once approved, you can expect the money in your account on the same day. QuidMarket will consider you for a loan even if you have a bad credit history. Find out how other lenders compare.
If you need to borrow cash quickly and tend to use a prepaid card for regular spending, you may be looking to get a payday loan transferred to your prepaid card.
The Money Platform is a peer-to-peer (P2P) lending platform that matches investors with borrowers and provides loans of up to . But at it’s core, is it just another short term lender?
Anico Finance is an online lender providing personalised, transparent, short-term loans of – to help cover and spread the cost of an unexpected financial shortfall. Read the full review and compare its rates and eligibility criteria with a range of lenders.
If you’re thinking about applying for a one month payday loan, use our guide to learn more about short term borrowing and compare rates from a range of UK lenders. Fast and simple repayment calculation and comparison of available amounts and eligibility requirements.
Sunny is an online platform providing clear and transparent short term loans of between – for when unforeseen circumstances pop up. Find out how their lending options compare.
A payday loan gives you the money you need quickly, even if you have bad credit or low income. But which one is best for your situation?
2 Responses
PjmJanuary 1, 2019
I need short-term cash as had a large unexpected bill but have a very poor credit rating. Please help.
Finder
JoshuaJanuary 2, 2019Finder
Hi Pjm,
Thanks for getting in touch with finder. I’m sorry to hear about the large unexpected bill that you need to pay.
To help you, you might want to check our page that lists bad credit payday loans. On that page, you will read a guide to help you better understand how to apply for a loan even if you still have bad credit. There’s also a table that helps you compare your options based on available amounts, monthly repayment, and total payable. You can then click on the “Go to site” green button to learn more.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
How likely would you be to recommend Finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Advertiser Disclosure
finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which finder.com receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. finder.com compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
I need short-term cash as had a large unexpected bill but have a very poor credit rating. Please help.
Hi Pjm,
Thanks for getting in touch with finder. I’m sorry to hear about the large unexpected bill that you need to pay.
To help you, you might want to check our page that lists bad credit payday loans. On that page, you will read a guide to help you better understand how to apply for a loan even if you still have bad credit. There’s also a table that helps you compare your options based on available amounts, monthly repayment, and total payable. You can then click on the “Go to site” green button to learn more.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua