Are you strapped for cash? Do you have an emergency car or home repair to pay for? Is your business expanding and you need to acquire new equipment? If you said ‘yes’ to all of these, then a short term loan is what you are looking for. This loan product refers to any loans with a short repayment period – from a few weeks to less than a year. The terms can be adjusted according to the lender or based on the preference of the borrower.
The purpose of the loan can vary significantly, too. It can be used to cover for the daily necessities or for business purposes. There are many UK lenders that offer this type of loan. Take time to look at the options available so you can get your loans much faster and at a good rate.
How to Compare Short Term Loans
Before you shop around for UK lenders providing short loans, it is important to assess if you really need to borrow money. Given that borrowing small amounts of money often carry with it a high interest rate, you need to thoroughly consider if you really need the money. Think about the purpose of the loan and if it will solve your money problems. Make sure you do not end up in a borrowing cycle.
In addition, look at other options before you borrow. You might want to talk to your service provider if you need a new payment plan that will ease the burden of paying off your utility bills. That way, you do not have to borrow money at a high interest rate.
To compare short term loans, here are some of the things you need to look into.
1 – Eligibility Criteria
As mentioned above, there are several types of short term loans and they vary in their structure. Take time to look at the list of requirements for each type of loan to see if you qualify for those. Make sure you also look into other eligibility requirements to ensure that you can increase your chances of approval.
A good example is if you have a bad credit rating. Take time to evaluate which types of short term loans are available for those with bad credit. By doing the legwork, you can save yourself time and effort when sending applications.
2 – Fees and Other Charges
The ability to borrow credit comes at a cost. This cost can differ significantly from one lender to another, as well as the amount of money you borrow and the type of loan. The most basic fee that you need to look into and compare when choosing short term loans is the interest rate. This is the amount you must pay the lender for the ability to borrow credit. The interest rate varies from one lender to another based on their risk type and their capacity to pay. The higher your credit score, the lower your interest rate (and vice versa). It pays for you to know your credit standing so that you can assess how much interest rate you qualify for. This will help you compare which lender can offer you the best deal on your loan.
In addition to the interest rate, short term loans might have other charges, too. Some but not all lenders might charge enforcement fees and late fees. Make sure to read the fine print and learn about all the charges you are expected to pay in exchange for getting the loan.
3 – Loan Amount
Typically, short term loans entail a small amount of money versus other types of loan. When comparing your options, it is important to look at the loan amount because each lender could set limitations as to how much you can borrow based on your eligibility criteria.
4 – Choose the Lender
The final and most important tip when comparing short term loans is to choose based on the lender. There are plenty of UK lenders that offer this type of loan but they are not the same. Each lender can give you a different interest rate and terms for the same type of loan. You need to give it due diligence and compare from as many UK lenders as possible. Thankfully, you can now do that online so you can speed up the process.
Another option is to look for an online loan broker. They can give you access to a panel of lenders that can offer the loan that you want. This will help narrow down your options to the best and legitimate lenders in the UK, saving you a great deal of time and effort.
At Money Pig, you can get short term loans when you need it. Our goal is to make it easier for you to find a lender that provides this type of loan for emergency purposes or when you are in need of extra capital funding for your business. With more than 50 lenders in our panel, we are able to create a shortlist of lenders that can offer you the cash you need when you need it. Since we are FCA-regulated, you can rest assured that the lenders we partner with are also legitimate and certified. This gives you assurance that you will be treated fairly by the lender and can get the best rate possible.
FAQs on Comparing Short Term Loans
Are you planning to get a short term loan? Before you do, take time to read the commonly asked questions below and their corresponding answers. These would provide you with insightful information you need to help decide whether short term loan is best for you and where to find it.
- What is considered a short term loan?
- How do short term loans work?
- What is the period of a short term loan?
- How can I get a short term loan immediately?
- Do short term loans improve credit?
- Are short term loans good?
- When is the best time to use a short term loan?
- What are the benefits of getting short term loans?
- Can you use short term loans for business?
- What are the advantages of short term loans?
- What are the disadvantages of short term loans?
- What are the different types of short term loans?
- How to get short term loans?
- What are short term loan rates?
- Do short term loans affect your credit rating?
- Can Money Pig help me find short term loans?
What is considered a short term loan?
Short term loans are one of two major type of loan that is available for borrowers. The other one is a long term loan. This type of loan must be repaid in a short term or within a few months. Any type of loan that must be paid off in less than a year qualifies under this category.
A short term loan is suitable for personal or business use. For personal reasons, it can be used to cover for minor cash emergencies. And for businesses, it can be utilised for working capital needs. Either way, most UK lenders do not require you to specify a purpose when applying for this kind of loan.
How do short term loans work?
Short term loans are designed to be disbursed quickly. This is one of several types of loan available that is designed for the purpose of covering minor cash flow problems such as emergency car repair, health emergencies, or any other emergencies that are outside of your monthly budget.
This is the best option for anyone looking for extra cash when traditional bank loans won’t do. Since this type of loan is designed to be paid back in a few months, then it won’t leave you owing a large amount of money. There are many forms of short term loans out there and you can apply for them online.
What is the period of a short term loan?
A short term loan is any type of loan that is set for repayment for one year or less. This timeline can vary from one lender to another, though. Some lenders will impose a repayment period of less than 12 months while others might exceed that time frame. However, this type of loan is definitely to be settled in less than 24 months (2 years).
The length of the repayment period is the lone characteristic that differentiates it from other types of loan. However, the shorter time allotted for the repayment of the loan also entails the possibility of a higher interest rate.
How can I get a short term loan immediately?
Just as short term loans must be repaid quickly, they can also be processed and released in a short amount of time. The fact that most UK lenders offering this type of loan operates online makes it even more accessible.
To get the loan immediately, you can visit the lender’s website and send your application. Before you do, check the list of required documents and make sure you complete the requirements so that your application can be processed immediately. Some of the lenders that offer short term loans can approve applications within a few hours. This also means that you can get access to the funds in a short amount of time.
Do short term loans improve credit?
Yes, if you make sure to pay the loans on time. No matter what type of loan you acquire, the only way you can improve credit is if you don’t miss payments and that you pay the loan within the term of repayment. Otherwise, it could end up hurting your credit score.
Are short term loans good?
It depends on how and what you use it for. Short term loans can be used like a traditional loan to consolidate debts or cover for any purchases. They are beneficial when you repay it within the designated period since you won’t incur interest rate. As with any loan, you need to be diligent when making payments so you can pay it in full.
When is the best time to use a short term loan?
There is no such thing as the best time to get a short term loan. Since this type of loan can be used for any purpose you deem fit, you can apply for one whenever you are short of cash and need to supplement your source of funding.
Short term loans for personal use can be used when you are in a financial emergency. For example, you have unexpected home or car repair and you have no extra budget for it. Another reason to get a short term loan is when you are short on your cash flow. A short term loan is also good for business purpose such as when you need additional working capital or if you want to acquire new equipment.
The most important thing to remember is that short term loans must be looked at as a solution for temporary financial crisis. It can help you get out of a cash crunch.
What are the benefits of getting short term loans?
When you are in a financial crunch, a short term loan is a good option because it offers plenty of benefits. One of those benefits is that this type of loan is easier to acquire. Since you will only be borrowing a short amount of cash, it is not as stringent when it comes to the requirements. Getting a short term loan is even easier when you have a good credit rating.
With this type of loan, there is also a shorter amount of time that you get to incur interest. This means that you will be paying less on interest since you have to repay the loan in less than a year or a period of few months. Lastly, the faster release of funds means that you can get it whenever you need it. If you have a financial emergency wherein you need to get access to cash immediately, then this is a good option for you.
Can you use short term loans for business?
Yes. There are no hard and fast rules that are imposed by UK lenders when it comes to the purpose of getting a short term loan. You can, therefore, use it for whatever purpose you see fit including for business use.
For short term financing for businesses, it is suitable for resolving cash flow issues. You can use the loan to cover for the shortage when you have an uneven sales structure or if you need to supplement your business cash flow. You can also use it to get extra funding for supplier bills or if you need to acquire new equipment for business expansion. The extra cash can definitely serve any business well.
What are the advantages of short term loans?
The advantage that short term loan has over other types of loans is its shorter repayment period. Obviously, the longer the loan life, the more it can accrue interest. The higher the interest you are paying, the more expensive the loan becomes.
You can take full advantage of the benefits of a short term loan when you make sure to pay it on time. Otherwise, your interest payments will add up and it can make your loan more expensive than it actually should be.
What are the disadvantages of short term loans?
There are several things to consider before you consider getting a short term loan as it has its own set of disadvantages. For example, this type of loan tends to have a higher interest rate. This is to compensate for the shorter repayment period. Make sure you compare various UK lenders to ensure that you can get the best rates possible; otherwise, you will pay a significant amount on interest alone.
Another potential disadvantage of short term loans is the risk of a borrowing cycle. Since this type of loan is easy to acquire and provides easy access to cash, there is a tendency to borrow money whenever you are short on cash. When you apply for short term loans, it is important to consider if you really need to and if you can afford to pay off its interest rate. Otherwise, you will be in a deeper debt trouble in the long run.
It is also important to note that you must pay off your short term loan within its term. If not, it can hurt your credit report significantly.
What are the different types of short term loans?
When talking about short term loans, it does not just refer to one type of loan. There are many different types and structures to choose from. It is important to know about them so that you can decide which type of loan to apply for based on your financial needs.
Payday loans are one of the most common types of this loan. It is best reserved for emergency purposes because it comes with a high interest rate (with some loans at 200% interest) and must be paid over a short period of time. Other types of short term loans include merchant cash advances, lines of credit, installment loans, and invoice financing.
How to get short term loans?
Getting a short term loan is relatively easy. Once you find a lender that provides this type of loan, you must submit all of the required documents and fill out your application form. Once all of these are submitted, your loan can be processed in approximately 24 hours or a few days (depending on the lender). The fast approval process also means you can get quick access to the funds you need.
The processes might differ from one lender to another. Make sure you do a thorough comparison so you know what to expect before you send in your application.
What are short term loan rates?
The interest rate on short term loans varies from one lender to another. Each UK lender also uses various parameters to evaluate every borrower and the corresponding interest rate. On average, however, short term loans come with 8 to 13% fixed interest rate. With that said, short term loans come with a fixed interest rather than variable interest (mainly because of the shorter duration for repayment).
Do short term loans affect your credit rating?
It depends. There is undoubtedly some level of impact to your credit rating but to know exactly what kind will vary significantly. This is true not just for short term loans but for all loans. Whenever you take out a loan and you pay it back within the terms of the loan, then it can certainly affect your credit rating in a positive way. On the other hand, if you fail to pay your short term loan within the term then it can impact your credit negatively.
It is important to give it due diligence because your credit could suffer. It is even more important with short term loans because they typically come with a higher interest rate.
What should I consider before borrowing?
Before you borrow using short term loan, it is important to consider a few things first. Try to find room in your budget for the fund you need before you take out a loan. If this is not possible, compare loans based on the interest rate and other similar charges. The extremely high costs of short term loans can put you in a bigger financial trouble if you do not know how to handle the repayment wisely.
Other things to consider include choosing only reputable lenders, complex loan contracts, and if the lender abides by the guidelines of the Financial Conduct Authority (FCA).
Can Money Pig help me find short term loans?
Yes. Money Pig can help borrowers in the UK find the ideal loan for their needs, which includes short term loans. We will start by gathering information about your credit needs so that we can assess if we have the right lender for you. We will then evaluate our panel of lenders to find the ones that are best suited for your credit situation in order to find the right match. We will do the hard work for you so that you can get fast approval. At the same time, you can guarantee that you are dealing with a legitimate lender.