Installment Loans

Installment loans are a way to borrow money and repay it in fixed, scheduled payments over an agreed period. This structure can suit people who need financial support but prefer the certainty of predictable repayment terms. Loan amounts and repayment durations vary between lenders, which means they can be used for a wide range of needs, from covering a small emergency to paying for a larger planned purchase. At Dot Dot Loans, we don’t lend money directly, we’re a credit broker that works with FCA-authorised lenders to help you find borrowing options that may fit your circumstances. For more on how the process works, you can visit the FCA’s guidance on loans.

What Are Installment Loans?

An installment loan is a type of borrowing where you receive a lump sum of money and repay it through fixed weekly or monthly payments. The loan amount, interest rate, and repayment term are all agreed at the start, giving you a clear understanding of your financial commitments from the outset.

How Do Installment Loans Work?

You begin by applying online or in person, providing details about your income, outgoings, and overall financial situation. The lender will then assess your creditworthiness and affordability. In some cases, this might involve a soft credit check, which doesn’t affect your credit score. If your application is approved, the funds are paid directly into your bank account. You then repay the loan in regular instalments over the agreed term, which could range from a few months to several years. For more on how affordability is assessed, visit the FCA’s guide to borrowing responsibly.

Benefits of Installment Loans

One key benefit of an installment loan is the predictability it offers. Fixed repayment amounts mean you know exactly what you’ll be paying each week or month, making it easier to budget and plan ahead. Loan amounts can vary, from a few hundred pounds to several thousand, depending on the lender and your eligibility. Repayment terms are often longer than those of short-term loans, ranging from a few months to several years, which can give you greater flexibility. For some borrowers, making repayments on time can also help improve their credit score, which may support access to better borrowing options in the future.

Things to Consider

Interest rates can differ depending on your credit history, the loan term, and the lender’s criteria. While spreading repayments over a longer period may make each instalment smaller, it can increase the total interest paid overall. It’s important to check that the repayments fit comfortably within your budget to avoid late payments, extra charges, or damage to your credit record. You can learn more about managing borrowing on the MoneyHelper website, an independent and government-backed advice service.

Types of Installment Loans

Installment loans can take several forms. Personal loans are unsecured and can be used for a variety of purposes, such as home improvements or debt consolidation. Car loans are secured against the vehicle you’re purchasing, meaning the lender could repossess the car if repayments are missed. There are also bad credit installment loans, designed for people with a poor credit history, although these often come with higher interest rates and a focus on current affordability.

Frequently Asked Questions