If you’re in a financial pinch and need some cash, then you might be considering a short term loan. Learn what a short term loan is, the different varieties and some tips on how to tell whether or not you need a loan.
If you’re looking for an FCA authorised and regulated lender, then cashasap.co.uk has short term loans available from £100 up to £300 (rising to £750 for returning customers).
Short Term Loans
Short term loans are, as the name suggests, a form of loan that is paid back within a shorter period than some other loans. This period can vary widely, including anything from 1 day to 6 months (occasionally longer), depending on what type of short term loan you’ve chosen.
The amount of money you can borrow with a short term loan also varies according to different direct lenders and whether you’ve borrowed money from them before and reliably paid it back. It’s often somewhere between £100-£500, but this can increase if you’ve proven to the lender that you’re responsible and reliable.
Remember: You should only ever take out a loan when you know that you will be able to pay it back in the agreed time. If you’re unsure, you should seek advice from a free money advice charity and look for alternative options and support. Not repaying a loan could lead to serious money problems.
Types of Short Term Loans
Many short term loan lenders will offer multiple varieties of loans and the most common two are instalment and payday. They both ensure that you can access cash on the same day, or occasionally the next day, from when you apply (depending on the lender) so you can get the money you need quickly.
Payday loans are a type of loan intended to be used when an unforeseen circumstance arises for which you couldn’t have predicted and therefore couldn’t budget. You might not have the cash to pay for an important expense but know that, once payday comes, you’ll immediately be able to pay it all back in one go.
Payday loans can also be valuable if you’re starting a new job and you don’t currently have the funds for travel expenses, for example, but will do after your first paycheck.
Instalment loans are very similar to payday loans in that they are intended to cover a cost you didn’t foresee and for which you therefore couldn’t budget, such as repairs on your car, a plumbing emergency or an unexpected bill.
Unlike payday loans, you don’t have to pay the money back in one lump sum, but can spread the cost of repayment over a few months. It will depend on the direct lender as to how many months this is, but it’s most commonly three.
Which is better, payday or instalment?
Instalment loans often end up costing more than payday loans, because you pay more interest due to borrowing money over a longer period. However, they can be a better choice if you know that you won’t be able to pay the money back in one go, but need to pay smaller amounts over a longer period.
It will depend on your individual circumstances as to which might work better.
When Not To Get A Loan
There are many instances when you should avoid loans and instead look at alternative options.
It’s vital you know before borrowing money that taking out a loan is an important decision. A record of your request for a loan will appear on your credit file so future lenders will see that you needed a loan. This could indicate that you’re financially unstable and therefore not a good candidate for other investments, such as a mortgage. This will depend on when you got the loan; if you got a short term loan years before you apply for a mortgage, banks or lenders will know that your financial position has changed so you should be fine!
When You Can’t Pay It Back
This is the first rule of all loans. If you know that you won’t be able to pay the loan back on time, or aren’t confident that you will, then you should not take out a loan. This is because late or missed payments can cause interest costs to build up, making it harder to pay back the loans and leading to further financial difficulty.
Alternative: Seek financial help from a free money charity or service, such as the Money Advice Service.
For Luxuries Or Non-Essentials
If you need money for a celebratory meal out, a family holiday or a new TV, then a short term loan isn’t the answer. Short term loans are designed to cover emergency expenses when you’re in a pinch and not for things that aren’t essential.
Alternative: Assess your budgeting and see if you can put money aside for a ‘fun fund’ or other non-emergency things.
It might be that you have to say no to meals out or a holiday for now until you build up your funds again.
Some people choose to use credit cards to spread the cost of more luxury items such as a new TV or a holiday. Credit cards charge interest on borrowed money, and it’s important that you budget to include repayments, but aside from minimum repayments, there are no fixed repayment dates so this might be an option depending on your individual circumstances.
Short term loans can be a good option for those that need cash quickly and know they can pay it back within the period specified, usually somewhere between 1 day and 3 months. If you’re looking for an FCA authorised and regulated lender, then cashasap.co.uk has loans available from £100 up to £300 (rising to £750 for those who have borrowed previously). They also have lots more information about short term loans on their website.