Short term loans can help to cover a gap in your finances if you have had an unexpected bill or expense to pay for. Whether you need to pay for a medical treatment, have urgent car or boiler repairs, or simply have a temporary cash flow issue, this type of loan can often provide quick access to money to make ends meet. With so many options available, it can be difficult to know where to start. In this post, we will detail each type of short term loan to help you make a decision about which would be best for you.
Payday loans usually allow you to borrow up to a few hundred pounds (or more from certain lenders), which is to be paid back plus interest in one lump sum, usually 30 to 35 days later or by your next payday. They are typically quick to secure from online lenders due to the urgency of the individuals that usually search for this type of credit. Many lenders even offer cash transfer on the same day of applying. However, you should be wary of the high interest rates that are typically attached to payday loans and only apply if you feel confident about repaying a lump sum.
Short Term Loans
This type of loan is similar to a payday loan, but repaid in instalments over a slightly longer period. You will apply for a certain amount of money from a lender, which will usually be considered a small amount, over a term that suits you. This can be anywhere between 3 to 6 months, with some lenders offering even longer terms. You will receive a repayment plan to help you understand how much will be owed each month and how the interest rate translates within the amount. Take the time to consider each potential lender and explore their representative APRs to avoid having to pay more than you expect.
Lines Of Credit
With lines of credit, you are offered the flexibility to use your account short term or long term. With this form of credit, you will set a limit on the credit that you can spend, depending on your needs, and only repay what you spend. Lines of credit do not need to be repaid in instalments like traditional short term loans, so they can provide a little more freedom when spending. However, this does mean that they are more difficult to budget for and can often carry high interest rates due to their flexibility.
No Credit Check Loans
Despite not really being a type of loan, no credit check loans are still one of the top search queries in the UK. According to FCA guidelines, every reputable credit provider needs to carry out a thorough credit check as part of their decision process, so any lender that offers no credit check loans or guarantees 100% approval should be approached with caution. If you have poor credit and want to avoid using your credit score as a basis for a lending decision, many online lenders offer bad credit loans, which are a more suitable option if you need a short term loan. These are based on affordability, rather than solely on your credit rating.
There is no one-size-fits-all solution to short term loans and covering your needs, so take the time to assess which would be best for you. If you need any more support, please seek impartial help from the Money Advice Service.