Flexible loans explained

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Can I get a loan with no early repayment fee?

Banks and lenders usually don't like to loan money that will be paid back more quickly than the agreed monthly repayment plan. This is because they create their forecasts based on making an agreed amount of interest,and to lose out on this interest would be detrimental to them. For this reason there will usually be an early repayment fee on most loans, as a way of covering the lost interest.

If you would like a loan that you can pay off at a rate that can alter from the one prescribed to you, a flexible loan could be your best bet. Alternatively, you could get a short term loan to keep interest rates lower.

How do flexible loans work?

Flexible loans work on the basis of you adding money from the loan into your bank account, and paying it back, at a rate that can change over time. In practice this means that in months when money is tight, you could pay back less, and vice versa. The cost of this flexibility is generally a higher interest rate. But if you're unsure of how much you'll need to borrow, or exactly when you'll need the bulk of the loan, a flexible loan could be a useful option.

What are the benefits of flexible loans?

Generally the positive points about a flexible loan can be broken down into 3 areas:

Payment holidays

Flexible loans often allow the borrower to take a payment holiday. This could be a few months where the loan repayment isn't required, and could be used when you're in between working contracts or have some other large expenditures. You'll still accrue interest on the loan, but can be safe in the knowledge the bulk of the repayments will wait until later on.

Early repayment

Many flexible loans allow you to repay the full sum of the loan early, saving yourself some of the loan interest.

Overpayments

Many flexible loans will also allow you to pay larger sums in some months rather than an agreed amount each time. This works similarly to early repayment, allowing you to reduce the overall cost of the loan by foregoing some of the interest payments.

Not all flexible loans will have all of these benefits, but usually some combination of the 3 will be available to you. Make sure to use our personal loan comparison tool to ensure you get the right flexible loan for your requirements

How do I get the best flexible loan?

When you compare loans, you'll need to know exactly what you're looking for. If you want to be able to pay the loan off earlier than usual, then look for flexible loans which allows early repayments and overpayments. If you're more interested in getting the lowest interest rates, look for fixed term loans instead. Be aware of the extra incentives and offers each loan is offered with.

As with any loan or credit line, it's important to make sure you can meet the minimum repayment terms when you opt to take out a flexible loan. Though you may have some form of grace period because of payment holiday clauses, any extended period without repayment that isn't agreed with your lender will hurt your credit score.

Can I get a flexible loan with a poor credit score?

Often when your credit score is poor you'll find you can only access loans at high interest rates. With that in mind, flexible loans, which often have high interest rates anyway, could be a fairly attractive option for you. The possibility of avoiding penalties and utilising payment holidays could be helpful if your income is relatively unstable. With that being said, you'll still need to stay on track if your goal is to improve your credit score.