What is an Instalment Loan & How Do I Get One?

An instalment loan is any loan, whether personal or commercial, that is repaid over time with set, scheduled repayments. Each repayment is a portion of the amount borrowed plus added interest on the debt.

Instalment loans are common, and examples of these types of loans are:

  • Auto loans
  • Mortgage loans
  • Personal loans
  • Student loans.

Other than mortgage loans, which are sometimes variable-rate loans (where the interest rate changes during the term of the loan), instalment loans usually come at a fixed rate at the time of borrowing.

What Are the Advantages & Disadvantages of an Instalment Loan?

Instalment loans can be flexible and tailored to your specific needs, such as the loan amount and duration that best matches your ability to repay it. These loans let you borrow financing at a lower interest rate than credit cards. Here are the lists of its advantages and disadvantages.


  • Big purchases are possible
  • Payment amount usually remains the same throughout the loan term
  • Allows you to pay off the loan early to possibly save interest charges.


  • May come with high loan fees
  • Can cause damage to your credit due to late or missed payments
  • You can be tempted to borrow more than needed.

What is a Personal Instalment Loan?

A personal instalment loan is a type of loan that you will repay through scheduled instalments. A personal loan could help you fund renovations, travel, education, a car, debt consolidation, a wedding, or a combination of these things and others. Talk to the loan provider to confirm the details before signing up for a loan. Most personal instalment loans will let you repay the loan on the schedule you choose – with weekly, fortnightly, or monthly repayments.

The options you choose when it comes to repayments and interest rates should depend on your finances and how frequently the interest is compounded. Make sure you know all your information before signing up for any personal instalment loans.

What Happens If I Default on an Instalment Loan?

Loan default is what happens when you can no longer make your repayments. If you’re worried about defaulting on your instalment loan, you should try to reschedule your repayments to avoid loan default if possible.

One of the loan default consequences in Australia is that the lender can sell the assets you listed as security on the loan when you made the loan agreement to recover the money you owe them. Defaulting on an instalment loan will also drastically affect your credit score, which will make receiving other loans in the future more difficult. For the most part, your lender does not want you to default on your loan, and they will likely be willing to come to a new arrangement to prevent that from happening.

Can I Obtain an Instalment Loan with Bad Credit?

Your credit score will be assessed through various factors. Outstanding debts or late repayments, previous loan applications, and lenders you have applied for are factors to be considered when applying for instalment loans for bad credit.

Practices that harm a credit rating are:

  • Making multiple credit applications at once
  • Missing payments
  • Being careless about your bills
  • Making late payments
  • Exceeding card limits
  • Skipping payments.

To avoid being black marked, it is advisable to be responsible for your payments. If you have no credit history or have not applied for a loan previously, it can be considered a bad credit and can cause a denied application.

Ways To Improve a Bad Credit Rating?

  • Pay bills on time
  • Keep a consistent job and home address
  • Grow your savings
  • Clear and avoid debts
  • Fix errors on your credit file (contact the credit bureau)
  • Minimise credit applications

Urgent repairs, huge bills and medical costs are just some of the reasons people apply for loans. No matter what emergency you are dealing with, these are some of the loan types available at Cigno Loans that can suit your circumstances.

Trying to get a loan? We can help. Contact us today to find out more.

Disclaimer: Please be aware that Cigno Loans’ articles do not replace advice from an accountant or financial advisor. All information provided is intended to be used as a guide only, as it does not take into account your personal financial situation or needs. If you require assistance, it is recommended that you consult a licensed financial or tax advisor.