Many of us will need to build up a deposit at some point. These are normally for when we want to move into a new home, either as a deposit on a mortgage or for rental. Both will require a sum of money. For rental it will tend to be a few months rent and perhaps a bit extra but for a mortgage it will be significantly more – perhaps 10% of the cost of the house. Either way, you will need to find a way of getting the money together to pay for this and this could possibly be troublesome for you. There are various solutions though and an instalment loan could be one that you might want to consider along with others.
What is an instalment loan?
An instalment loan is a short-term loan which is repaid back over a series of months. It tends to be available to most people, including those with a poor credit rating. The loans are not for huge sums of money, maybe hundreds or pounds, possibly up to a few thousand. They are repaid in instalments and can be arranged quickly. They tend not to be offered by mainstream lenders so are often arranged online.
Who are instalment loans for?
These loans were set up for those people that needed money but had a poor credit rating so could not borrow from a traditional lender. They allow borrowers to have more money compared with other short-term loans, such as payday loans as the repayments are spread over months rather than being in a lump sum. This means payments are more manageable and this way of borrowing can be favoured by those that want to borrow a bit more. They are arranged quickly so can be used for emergency purchases but do not have to be. There are no specific rules about who the loans are for but as they are available to those with a poor credit score, a bulk of their customers tend to come from this group.
Would an instalment loan work for a deposit?
If you need a deposit for a mortgage then it is likely that you will need a significant amount of money. It is unlikely that an instalment loan will be able to provide you with enough. You will also probably need money in your first few months of moving in to decorate, refurbish or buy other things and so having loan repayments on top of mortgage payments and all of these other things to pay for will probably be tricky for you to manage.
For a rental the deposit will be a lot less. A loan could be a better idea here. You will not need to pay for refurbishing or painting as your landlord should have done that if it needed it. You will need to make sure that you have enough money to cover the rent and loan repayments though, but as long as you are aware of how much this is going to be, then you can plan for this. Using a loan, rather than saving up, will mean that you will be able to move in more quickly and this might be something that you need to do if your landlord has served notice on your previous place and you need to find somewhere to live quickly. If you do not have the savings available to pay the deposit then you will need to borrow. Even if you get the deposit back on your previous place, you may find that you will get it back too late to be able to use it on your new one, although you might want to use it to repay the loan early if you are able to, as long as the lender so does not charge too much for overpayments. If it is an idea that you are hoping to do, then check before you take out the loan whether there is an early redemption fee so that you can decide whether it might be better to go with an alternative lender that does not have one.
So, whether the instalment loan will help you with a deposit will depend on your specific situation and what sort of a deposit you are paying for. It will depend on how much the deposit it and how much you can borrow with the instalment loan. You will need to think about the amount that you will be expected to repay each month and whether you will have enough money to pay this on top of the rent and other bills that you will be paying as well. It is wise to compare the different lenders to how what they are offering differs and you will be able to find the loan that offers you the best value for money by comparing them on price as well as the service that they will provide for you.