Instalment loans are widely popular because you can manage your payments easily. However, this facility is available in case of long-term loans. A long-term loan is a loan paid back over a period of more than 12 months. Bad credit loans are short-term loans. The aim of these loans is to help you tide over during emergency or unforeseen expenses.

A bad credit loan is a funding source that aims at helping those people who have impaired credit standing. With the poor credit rating, it is onerous to borrow money from traditional lenders, but online lenders have made it possible. All you need to do is fill out the application form and if you qualify for it, you will get money the same day directly in your account. Your income statement serves the basis for the approval of your application.

Bad credit loans come with higher interest rates because the lender is sceptical about your payment capacity. The repayment length of these loans cannot be more than a year depending on the amount you borrow and the policy of your lender. Among all short-term loans, loans for people with bad credit are featured with instalment payments. Is it true or a stratagem to trap gullible borrowers?

Some require lump sum payment

Each lender follows a different policy. If you research, you will find some will be offering these loans with instalment payments and some will be offering with lump-sum payments. It is crucial that you know the policy of the lender beforehand so that you do not get nasty surprises down the line.

The disbursal limit for poor credit loans varies from lender to lender. If you are borrowing a small amount, for instance, not more than £1,000, you will end up paying the whole of the money in a lump sum. Lenders do not allow you to retain money for beyond a month.

However, some lenders will allow you to pay back in either weekly or bi-weekly instalments, settling your whole debt within a month. If you want to pay down monthly, the size of the loan needs to be as large as possible.

However, these instalments including weekly or bi-weekly do not include the amount of your principal. Understand this by an example:

Case 1: A lump-sum payment

You will pay off £333.6 as the period of two weeks expires. If you fail to pay back the debt, you will have to roll over the loan for another two-week period.

Case 2: weekly instalments

The payment will be as follows:

At the end of week 2, you will pay the principal amount (£300) in a lump sum. It means that your every instalment will go toward the interest-only, but you will pay the principal at the end of the term in a lump sum. 

Amortisation

If you want to pay down the debt in equal monthly instalments including the principal amount, you need to make sure that the loan is amortised. It includes periodic payments made to both the principal and the interest.

If the size of your borrowing is small, you cannot get this facility. A few direct lenders provide amortised instalment loans for bad credit. You should ask the lender about it before signing the agreement.

Such loans come with two payment methods:

• 1- Equal principal payments
• 2- Equal total payments

Most of the lenders follow the second payment method because you know how much amount you will have to pay every month beforehand.

The bottom line

If you want to take out instalment loans for bad credit, you need to ensure whether the lender follows the policy of amortisation or not. Do extensive research before choosing any lender. Interest rates and APR may vary. Make sure that you borrow money from a lender who lends money at affordable interest rates.

Loans are all about the crucial financial help that people need when they are in serious financial trouble. Such trouble can be identified with the situation of unemployment, growing debts, insufficient funds to payout bills and many more. In such circumstances, loans present a vital assistance to stabilise the finances of the borrowers. In the UK, the scenario is not much changed here, as a number of people have some kind of financial problems in their life.

The growing financial crisis has become the reason of multiple loan options available at the marketplace and bad credit loans are not the exception. These loans are related to the bad credit score of the borrowers, which is the determining factor for the acceptance of their loan applications. It is clear that the lenders have some kind of doubt on the financial credibility of the people with poor credit scores. However, there are few loan companies, who come in front to help such individuals by providing these bad credit loans.

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The Most Important Information about the Loans

Before choosing a loan for your financial convenience, you should be familiar with its various features and advantages. Same thing applies to these loans. People, when they are in urgent financial need, usually overlook many things about a loan that may not favour them later. The bad credit loans are the credits for short term duration and people apply them for availing small money. Most of the people look at these loans when they feel an urgent need of funds to fulfil necessary financial activities.

The loan companies have the competition among them due to the increasing importance of the loans for bad credit people in the UK. Such competition is good for the people because they have multiple deals to choose to keep their finances safe. More importantly, the lenders are now offering these loans on such repayments, which the borrowers can easily follow and bring back their lost credit scores.

Learn Appropriate Use of Borrowed Sum

Once your loan application approved despite having a bad credit score, the opportunity is now in your hands to utilise funds in a right manner. Suppose, you have lost your job and with no income source, keeping the financial activities active become hard. These bad credit loans are surely the perfect financial alternative for you because the lenders are providing them as the guaranteed loans for the unemployed people.

The loan applications are not examined on the basis of borrower's credit history or the income source. In fact, lenders present funds on the trust that the borrowers will arrange the repayments and use the funds for the right purpose. Their objective is not to put obligations on the borrowers, but to reach out at the maximum number of people in solving their financial problems with the options like short term loans for the unemployed people.

Finding the funding sources during the financial emergency is not difficult these days. The presence of these kinds of loans gives people a sigh of relief even if they have a bad credit rating or no income source.