There are many things to consider while applying for a loan. For example, you have to decide on the loan term, amount, estimation of monthly instalments, and many more. Perhaps the most important one is the loan amount. Anything related to the loan will be decided on based on how much you want to borrow.
The same thing applies to installment loans. These are types of personal loans where you will qualify for a lump sum amount to borrow and pay it back in fixed monthly instalments.
You can choose between weekly and monthly repayments, but this will depend upon the amount you want to avail of.
Literally, the UK loan market trends show that most people want to get installment loans from £1000 to £25000. It depends from lender to lender, as some allow more than that while some offer less than that.
As the responsible borrower, you will have to decide the right loan amount. This becomes more important when you have a poor credit history. Yes, restrictions are there for people with bad credit when it is related to the loan amount.
Mainstream lenders seem quite stringent in their approach. They won’t offer you a large amount to get if your credit score is low. It is where many financial experts suggest getting installment loans for bad credit from direct lenders only.
They are flexible in their lending approach and can offer an amount that is affordable to you.
Factors that you should ponder upon while deciding the installment loan amount
It is not straightforward to decide the loan amount. You should not take it lightly that whenever you need a loan, you can apply for any amount straightway. It is a wrong practice.
Instead, you should be extra careful while choosing the amount. You cannot be wrong while indulging in the loan application process. Follow the suggestions below and then take the final decision on the borrowing amount.
- Analyse your financial situation
The first thing that you should do is analyse your current financial circumstances before going for a loan. Suppose you have lost the job and there is not much cash flow. Analyse this situation and the needs for which you need a loan.
If pending bills are there, you may opt for a smaller amount to borrow. On the other hand, you need to do urgent home repairs that will demand a higher amount of money. Therefore, you should be active enough to judge your current needs and then finalise the loan amount accordingly.
- Borrow according to your income capacity
The second suggestion is to ask for the loan amount according to the capacity of your monthly income. No lender will offer you the loan unless you can repay it. You have to pay it back, but not at the expense of your household budget.
A responsible lender will not force you to use your savings to pay the loan amount. In addition to that, you should only repay your income. Here, one thing is important that you should vary loan amount according to your full-time or part-time income.
- Decide on secured or unsecured loan
Another vital factor that helps in deciding the loan amount for installment loans in the UK is secured or unsecured loans. As mentioned above, you may have a significant purpose to achieve for which you need a large amount. On the other hand, a financial emergency forces you to go for instant funding, but a small one.
As a result, when you need a considerable amount for a bigger purpose, go for secured loans. Keep collateral to secure the amount and fetch up to pound 50,000. On the other hand, an unsecured loan will be more suitable for an urgent need of funds or during a financial emergency.
- Try to have a guarantor for a larger amount
Whether you approach mainstream lenders or direct lenders in the UK, you may be asked to present a guarantor to ensure the proper loan repayments. In fact, it is good if you have a person with a good credit score or a homeowner to be your loan guarantor.
The lender will be satisfied that the loan money will be repaid either by the primary borrower or the guarantor. You can get large amounts of money to borrow, and that will be at lower interest rates. Still, if you lack a guarantor, then you can avail yourself of direct lender installment loans with no guarantor option.
- Evaluate your current credit score
Finally, your credit score matters a lot. As we have mentioned above, a person with a good credit score can enjoy getting a large amount at a lower interest rate. An individual with a poor credit score can only manage a small borrowing amount, and that would be on a higher interest rate.
Check your credit report prior to applying for instalment loans. For that, you can approach the credit reference agencies like Experian or Equifax. These will give you every idea of where your credit score stands now. If you find any fault in the credit report, contact the concerned agency and rectify it as soon as possible.
Your lender will analyse that credit report and then grant the affordable loan amount.
Conclusion
There are many aspects in which instalment loans prove useful. The loan amount is indeed one of them. If you are good at your loan preparation and analyse everything related to your financial situation, then choosing the ideal loan amount will not be a problem for you.
The crux of the discussion highlights that a borrower like you should know their financial limitations. If the need is for a small amount, then ask for a smaller loan sum only. It will give you confidence of repaying under the given schedule.
You can opt for a larger amount if it is too much necessary. For example, you want to purchase a new car or a home. Or, you want to do a complete home renovation. Not only the amount but also the term will also increase.
In a nutshell, installment loans are available for both smaller and larger amounts. The key is your affordability and actual funding needs.
Jessica Rodz is the Senior Content Writer at Cashfacts. She has a long career in the field of content writing and editing. Jessica has the expertise in the UK lending marketplace where she has worked with 7 different lending organisations and acquired many responsibilities from preparing loan deals and writing blogs for their websites.
At Cashfacts, Jessica is managing a team of experienced loan experts and doing a major contribution in guiding the loan seekers via well-researched blogs. She has done graduation in Business (Finance) and now currently doing research papers on the UK financial sector.
