Guide to Short Term Loans
A short term loan is exactly what it sounds like, a loan of money that is paid back in a short timescale, usually within weeks or a few months. This makes them very different to loans that are paid back over 5 10 or even 20 years.
Who Needs a Short Term Loan?
Short term loans can be useful if an emergency happens, for example your car breaks down or there is a leak in your roof. The emergency cannot have been planned for, it needs to be dealt with and you do not have the money available. Many short term loans are called payday loans, which require you to pay the loan back within two weeks to one month.
Benefits of Short Term/Payday Loans
The benefits of short term loans is that the application process is usually very quick and easy and crucially you often get the money paid into your account very quickly. This allows you to take care of the emergency as quickly as you can without having to save up the money first. Compare this to taking out a loan from your bank. This by contrast, often involves paperwork, visits to the bank and references being taken.
Payday loans are a type of short term loan. They are high cost but can be a way to get access to cash before your next payday. You can usually borrow between £100 and £300. Loans typically last for just 31 days with annual percentage rate(APR) charges as high as 5,000%. The clear advantage is you get the money you need before your next pay day, the clear disadvantage is that you pay high interest on that loan.
Personal unsecured loan
Another option is to consider taking out an unsecured loan. This can be quick and easy to apply for online and you will get the money into your account quickly. They will also often allow you to spread the payments out over a number of months, hence giving you longer to pay back the debt.
If a short term or pay day loan is not right for you, what else can you do? Well alongside getting good financial advice you may want to consider a credit card. As long as you pay the debt off, many credit cards are interest free, unlike payday loans. If your credit rating is also poor you may want to look at a local credit union. A credit union is an independent local co-operative organisation who aim to help people get credit who otherwise find it very difficult.