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Instalment loan: definition and advantages

Credit 24 offers instalment loans exclusively, also known as "consumer credit". Find out more about this type of loan, its features and how it differs from other forms of credit.

Instalment loan: definition

An instalment loan is a credit agreement covering a sum of money granted by a bank or a credit institution. What sets it apart is that the repayment terms are settled when the credit agreement is signed. You therefore know in advance the amount borrowed, the term of the credit and the instalment you pay each month.

What is the difference between an instalment loan and a revolving credit facility?

Revolving credit facility: definition

A revolving credit facility, also called a "cash reserve" or "revolving credit", is a credit line granted by a bank or a credit institution. This form of borrowing is usually offered through a credit card, or as an overdraft facility, and lets the consumer draw on that reserve up to a limit set in advance.

Revolving credit: often too expensive a choice

Most of the time, the interest rate on revolving credit is very high, which means the total cost of the credit is high too.

What is more, when a consumer takes out a revolving credit facility, the lender offers a minimum instalment to pay each month. Unfortunately, that instalment usually consists mostly of interest owed to the lender, with little or no capital repaid.

The result is that by paying this minimum instalment you never repay the amount borrowed: you only pay interest to the lender.

Revolving credit: beware the risk of over-indebtedness

While revolving credit can help a consumer cover a temporary dip in cash flow, it carries a high risk of over-indebtedness. A consumer may be tempted to take out several facilities at once and to pay only the minimum instalment, made up mainly of interest, that the lender offers.

The result is that when they want to repay the capital borrowed on each of their credit cards, the amount to be repaid each month may be considerably higher than the minimum instalment the lender proposed. The main risk is exceeding one's financial capacity and ending up over-indebted.

Our advice: choose an instalment loan instead

Unlike a revolving credit facility, an instalment loan agreement fixes everything in advance: the amount borrowed, the interest rate and the repayment term. That gives the consumer a fixed instalment that fits their monthly budget, with no unpleasant surprises.

I need cash: choose an instalment loan instead

If you need a sum of money to carry out a project, we suggest you apply for a personal loan instead.

The personal loan is a type of instalment loan for any purpose that lets you borrow between €2,500 and €100,000 with a repayment term of 24 to 120 months. Because it is an instalment loan, you know everything in advance: the sum borrowed, the interest rate applied, the term in months and the monthly instalment. Once your agreement is signed, Credit 24 pays the sum borrowed straight into your bank account by transfer.

I have revolving credit facilities: repay them with an instalment loan

If you hold one or more revolving credit facilities, we suggest a credit buy-back that brings them together into a single credit agreement. Credit 24 will ask you for the most recent statement for each card to be closed, in order to establish the capital to be repaid. Credit 24 will also take care of cancelling your cards with the lenders concerned.

What is the difference between an instalment loan and a mortgage loan?

Mortgage loan: definition

A mortgage loan is a loan with a property purpose: it serves to acquire or retain a property. The lender grants the consumer a sum of money in exchange for a mortgage registered against their property.

Instalment loan vs mortgage loan: little room for comparison

As you will have gathered, you need a property purpose to take out a mortgage loan. For all your other projects, you can apply for an instalment loan.

In conclusion

Unless you have a property project, whether a purchase or a refinancing, the instalment loan is the solution to favour for all your other projects, because it fixes every term of the agreement in advance. In other words, it is a more reassuring solution for the consumer, who knows in advance the amount they will receive, the fixed instalment they will pay, and the start and end dates of their credit.

Our range of instalment loans

Credit 24 offers instalment loans for each of your projects:

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