We may often her about short term loans but not really understand what they are. The phrase might seem a bit vague but it does describe a very specific type of loan which may go by different names. Short-term loans tend to be payday loans. You may have heard of these too. It can be good to have a clear understanding of what they are, who they are for and how they differ from other loans and this will help you to be able to make a better choice if you need a loan. It is important to know about all loan types you see, then when you need one, you will be able to pick the one that is most suitable for you.
What are Short-Term Loans?
Short -term loans are a unique way of borrowing up to £1,000. The loans can be arranged quickly, sometimes within a few hours and they are available for most people. There are very few requirements for borrowers apart from the fact that they need to have an income and they need to be a UK resident with a UK bank account and be over the age of 18. This means that most adults will be eligible for them. They are usually arranged online although there are sometimes high street lenders which will offer them as well. The loans usually only last for a few weeks as they are designed to be repaid when you next get paid. They usually have to be repaid in full – so the amount borrowed and the interest and any fees, need to be repaid all in one go.
Who are They for?
The loans came about because it was recognised that there were people with a poor credit record that needed to borrow money in an emergency but could not do it. They therefore decided that they would launch a loan that was available to those who could not borrow money elsewhere due to their credit record. It was realised that they would be likely to need money quickly and therefore many of the lenders are set up so that their loans can be accessed 24 hours a day and the money might even be available within a few hours. This means that they are also useful for anyone that needs money really quickly, particularly out of normal banking hours. Of course, lenders do vary in how long they take and what hours they operate so you may need to check this out if you do need money quickly, to ensure that you are going to be able to get it when you need it. It is easiest to find this out by contacting the lender directly and asking them.
How They Differ From Other Loans
So the main differences are that they can be arranged very quickly and that credit rating is not important. However, repayment is also different. With most short-term loans, you will repay the full balance, interest and fees in one go. This will be set up to happen on the day that you are paid, which means that you should have the money available to repay it. Of course, as you are repaying a lump sum, you will need to be confident that you will not only have enough money available on the day to be able to pay it, but you will also have enough left to cover all of your other essentials as well. So, you will need to do some careful calculating before you take one out as you would need to do with any loan that you take out.