Pay monthly loans
Whether it’s for your daughter’s wedding or a new car, loans you pay back monthly can be a useful way to manage your outgoings.
Learn everything you need to know about pay monthly loans, from repayment terms to interest rates and more.
What are pay monthly loans?
They’re pretty much as they sound – easy-to-manage loans that you pay back monthly. It’s just another name for a personal loan that you pay back on a regular basis – usually by direct debit.
Monthly loans are different from credit cards, which allow you to pay back varying amounts depending on how much you’ve spent. You can also pay off a credit card in one go and avoid interest charges.
What are the benefits of monthly payment loans?
Pay monthly loans have several advantages. These include:
- Flexibility – when you take out the loan, you can choose your repayment period.
- Affordability – you can check whether you can afford the monthly repayments before you take out the loan.
- Easy repayments – a pay monthly loan lets you set up a direct debit to cover your monthly repayments. Typically, you’ll be able to choose the date that payments are taken so it works for you and your budget.
- Fixed monthly payments – monthly loans usually offer a fixed rate of interest, so you’ll know exactly how much is leaving your account every month. That’s a big help when it comes to budgeting.
Pay monthly loan rates
We show how paying back a £3,000 loan over a longer period can bring down your monthly payments. But, beware. By choosing to repay over a longer time period, you’ll end up paying back more overall as you’ll be paying interest on the amount you borrow for a much longer period.
|
Amount you borrow |
APR |
Borrowing period (in years) |
Monthly repayments |
Total you’ll pay back |
Total interest paid |
|
£3,000 |
5% |
2 |
£131.51 |
£3,156.24 |
£156.24 |
|
£3,000 |
5% |
4 |
£71.15 |
£3,415.20 |
£415.20 |
What’s the best pay monthly loan to get?
The best monthly loan for you depends on why you need it, your disposable income and how well you can manage the repayments.
It’s always best to take out a loan with a low interest rate, with as short a payback period as you can comfortably manage. That way you’ll pay less interest.
The APR (annual percentage rate) is a set method of calculation to allow potential customers to compare different loans more easily. This is because different providers work out interest rates and charges in different ways. For example, calculating interest rates daily, weekly or monthly.
Adverts for loans must show a representative APR, which is offered to at least 51% of successful applicants. But this means that around 49% of applicants will be offered a higher rate than the representative example, based on their financial history.
You can use our loan calculator to see how much your monthly payments might be for the amount you want to borrow. Or check the size of loan you might get for the amount you can afford to pay back regularly.
You can also see what the impact on the overall cost would be if you wanted to pay back over a longer period to benefit from lower monthly outgoings. Using the calculator won’t affect your credit score.
What do I need to get a loan?
To apply for monthly repayment loans, you’ll need to meet certain requirements.
Generally, you’ll need:
- To be 18 or over (for some providers it’s 21 and some also have upper age limits)
- An income (job, pension or benefits)
- A valid UK address
- A valid bank account.
Can I repay my loan early?
It’s usually best to pay off your loan as early as possible – that way you’ll be debt-free quicker – but you might have to pay an early repayment fee. Your lender should let you know about this when you take out the loan.
The other advantage of paying off your loan sooner rather than later is that you’ll pay less interest overall.
If you want to pay off your full loan amount, contact your lender and ask for an early settlement amount. This is the total sum needed to repay the loan. You then have 28 days to pay it from when your request is received.
The lender will let you know if there are any fees, so you can decide if you want to go ahead. You’ll want to weigh up if you’ll save more in interest than you’ll have to pay in charges, to see if it it’s worth it for you.
If you think you might be able to repay early, then it’s worth looking for a loan with pay back monthly options that doesn’t include this kind of fee. If you want to pay off part of your loan, your credit agreement should be clear about how any partial early payment will affect your remaining repayments.
If it’s unclear, you can negotiate with the lender about reducing your regular instalments or pay back the rest of the loan over a shorter period.
Always check the terms and conditions as there may be a charge for repaying your loan early.
How can I compare loans?
Start by working out how much you want to borrow and for how long. Then use our loan comparison service. We’ll do all the leg work for you and show you a list of options. You’ll be able to check if you can use a loan for debt consolidation, if repayment holidays are allowed and if there are conditions for repaying early.
Compare the Market acts as a credit broker, not a lender. To apply you must be a UK resident and aged 18 or over. Credit is subject to status and availability.
Frequently asked questions
Can I get a monthly repayment loan with bad credit?
It’s possible, but unfortunately, these will not be low monthly payment loans. You’ll usually have to pay a higher rate of interest as you’ll be seen as a higher risk borrower. There are also likely to be fewer options, with fewer lenders willing to offer you a loan.
To see which loans you’re likely to be accepted for, before you apply, use our loan eligibility checker. It’s a soft credit check and won’t affect your credit score.
It can also be helpful to improve your credit score before you apply. This could help you to get a loan with a lower rate of interest.
If you don’t have time to improve your credit score, you may be able to find a bad credit loan, although you may have to look that bit harder to find the right deal.
Can I get pay monthly loans on benefits?
As long as you have a regular income, whether that’s benefits, salary or a combination of the two, you could be eligible for a loan. However, you may find you have fewer lenders willing to borrow from.
Lenders may use the benefit income you receive to calculate the amount you’re eligible to borrow, along with the interest rate and loan term length.
If you’ve been on specific benefits for six months or more, you may be eligible for a government Budgeting Loan. These are designed to help pay for the cost of living when you’re struggling to keep up with household bills or other expenses.
What should I consider before getting a pay monthly loan?
Think hard about why you need the loan. Could you wait and save up instead?
If you decide a loan is the right option, work out a monthly budget to see how much you can realistically and comfortably afford to pay back every month.
If you think you might be able to pay back your loan early, check for any early repayment penalties before you sign up.
Can I use a pay monthly loan for debt consolidation?
Potentially yes, but not all providers will offer loans for this purpose.
A debt consolidation loan allows you to replace debts with multiple lenders – on credit cards, overdrafts, store cards or loans – with one convenient monthly payment.
You may be able to find a loan with a lower rate of interest than some expensive credit or store cards. However, you could pay more interest in total if you spread your debt consolidation loan over a longer period.
If you’re struggling financially, you can get free, confidential advice from MoneyHelper.
How can I borrow money urgently?
If you need to borrow money urgently, there are several types of emergency loans available.
For example, a bridging loan is a short-term loan that can be used to get a quick cash injection, while you’re waiting for other money to come in. This could be the sale of a property, car or other asset.
Emergency loans often come with either higher interest rates or require you to secure the loan against an asset. For this reason, you should be careful when considering these options.
If possible, you should try to avoid payday loans. These types of loans advertise quick access to money, but are often tied to some of the highest interest rates on the market.
What happens if I apply for a loan and get rejected?
If your loan application is rejected, don’t lose heart. There might still be other loans available.
Think twice about if you should apply for another loan somewhere else. It’s more than likely you’ll be rejected again – then you’ll have two hard searches on your credit file.
Before you apply for a loan, use our loan eligibility checker. This will help you see loans online with monthly payments you’re likely to be accepted for, without having an impact on your credit score.
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The Editorial Team - Compare the Market
Experts in personal finance, insurance and utilities
Compare the Market’s Editorial Team is made up of industry experts with decades of experience in personal finance, insurance and utilities. Each of our authors has an area of expertise, where they can share their extensive experience to help you get a better deal, by finding the right product and saving money.