Installment loans, whether they are secured or unsecured, are repaid over a period of time. The term could be three months up to three years. Secured installment loans can have a much longer repayment term. Unsecured installment loans up to a thousand pounds usually have a repayment term of a year or less. Three to six months is what you are looking at if you are not borrowing over a thousand quid. If you are opting for unsecured installment loans, then you must seek three major clarifications from the lenders.
- The first clarification is the actual rate of interest. You will find most lenders mentioning representative annual percentage rate. This is solely for an informative purpose. You get an idea of how much interest you are likely to pay. The representative annual percentage rate does give you an indication but the actual rate may vary. You must note that representative annual percentage rate is not the maximum interest you are likely to pay. The actual rate could be higher, which is why you must have absolute clarity as to how much you will pay.
- It is possible you will get an actual rate of interest but there may be a subtle message in the terms if the phrase up to is used. Whenever you get a quote that mentions up to before stating the rate of interest, chances are you are being charged a variable annual percentage rate. This is not unusual. Lenders have the right to levy a variable rate of interest but of course they must inform the borrowers. Since they are stating a maximum rate, they are legally permitted to change the annual percentage rate but with due notification. You should not wait for such a notification after you have taken the loan. Understand the scope of change when a variable rate is reviewed. You should be able to estimate how much the rate can vary, even if it is tentative so you can manage your repayment accordingly.
- Ask a lender if you can repay the installment loans before the end of the term. Secured installment loans can be repaid early. Unsecured installment loans do not have such a provision. In fact, there are terms of agreement that prevent early repayment. Some lenders may even charge you a fee for early repayment. Clarify if you can repay the full loan amount before the term is over and if there is any charge that might get levied on the sum you owe.