Short Term Loans FAQs

Pros and Cons of A Short Term Loan – Find Out When To Get One And What You Should Know First

APPLY FOR A LOAN TODAY

We do not credit check, getting a quote will not affect your credit rating.

short-term-loan
  • Home
  • Short Terms Loans
  • Pros and Cons of A Short Term Loan

If you are considering securing a short-term loan, we have put together this article for you that will explain some of the pros and cons. This will allow you to read through, get the information that you need and of course be able to get the loan that you need without any confusion.

The other reason we decided to write this here at MoneyPig, is to help you work out whether you need a short-term loan and also tell you some of the drawbacks of getting these type of loans as well as alternative choices for you.

Bear in mind that we have provided this information to help but it does not constitute as financial advice. If you wish to get professional financial advice, make sure that you look into financial advisers for recommendations.

Let is have a look at the pros and cons of a short-term loan:

Pros:

Quick Access To Money:

One of the most obvious benefits that you will get is quick access to the money that you need. This is the main reason that short-term loans are so popular, it will allow you to get the money that you need normally within a few days. There are also some lenders that will give you same day loans.

If you are looking for one of the fastest ways to get access to funds in the form of the loan, then you will not find many methods that are quicker than applying for a short-term loan.

Online Application:

One of the key differences that you will find with short-term loans is that they are not normally offered by banks. You will be able to go to your bank and apply for a loan, but they will normally give you more of a long-term option.

There are benefits to this, however sticking with the conversation about short-term loans if you are looking to borrow less than £5000 you will find it difficult to get a bank to lend you this money. There are some banks that will offer short-term loans but most of them are provided by lenders online.

This means that you get a simple online application in most cases. The other reason that this is a huge benefit to most is that no one will see you in the bank getting a loan, you will not have to do give details on your finances in public and you are able to do everything in the comfort of your own home.

Instant Decision:

Tied in with the ease of an online application you will normally find that you get a very fast decision. Depending on the lender that you are using they will be able to assess your details and then give you how much they are able to lend you, the rates they can lend you the money at and also display your repayments on the screen.

Some of the best lenders will also try to find you the best rate by comparing a network of available lenders. This is exactly how we work here at MoneyPig, by comparing the best available choices for you. It means that you are far more likely to be approved for a loan and you will also be able to compare repayments.

A huge plus point of getting an online loan is the instant decision.

NOTE: Of course, not all online lenders will give you an instant decision but most of them will give you a decision within 1-3days.

Not As Strict Requirements:

This is a double-edged sword. However, the pro-of getting a short-term loan is that you will normally find that he does not have as strict requirements as you will find with more of a long-term loan. This is simply because you will be borrowing a smaller amount of money, it means that you will not have to have the loan for years.

The way lenders eliminate some of the risk is by charging a higher interest. We will get onto this in the cons and explain how this works. If you are after a short-term loan, then normally you will not get as strict requirements as with a standard loan.

Bad Credit Considered:

You can also get a short-term loan in most cases with bad credit. However, we urge you to think carefully if you are having problems getting a short-term loan and you have bad credit. Although this is a pro, as it means that you can get the money that you need even if you have bad credit; it is also very important that you know exactly how much you can afford to repay so you do not run into more financial problems.

We highly recommend the before you apply for a loan if you have bad credit that you work on repairing your credit score. You can read an article that we have on the site that will show you how to use credit cards to boost your credit score.

Alternatively, you could go through to a service like Experian, it will allow you to see your credit score and it will also give you a rough idea of how likely you are to be accepted for a loan.

This is also a fantastic way of getting Intel on your finances instead of getting a company to do a hard credit check on you.

The other thing that Experian will give you if you decide to pay for the service is recommendations on how to build up your credit score, this can be well worth doing as it will benefit you in the future.

Conclusion:

There are a lot of pros to being able to get a short-term loan. The fact that you can simply go online, find a reputable company and apply for a loan without too much fuss is a sign of the times.

Bear in mind this can be a blessing and a curse and if you are thinking about applying for a short-term loan make sure that you do your homework on the repayments, so you do not run into financial problems.

Let is now have a look at some of the cons of getting a short-term loan.

This will give you some points to think about before you rush in and secure your short-term loan.

Here are some of the cons of getting a short-term loan:

High Interest Rates:

Remember, when we said it was easier to get a short-term loan then another type of loan?

Well, part of the reason for this is that the way lenders reduce the risk is by charging higher interest rates. As they know people that need a short-term loan and a less amount of money will be a higher risk than someone that is borrowing more money.

They essentially charge more for the loan.

The other thing that you will find is that different lenders will charge different amounts and a lot of it is due to your personal financial situation. This is why it can be a good idea to check out the service like Experian, so you can see where your credit score lies as that is one of the areas that will influence how much they will charge for the loan.

To take some of the sting off this, remember if you need a short-term loan, it is best to only borrow what you need and for a shorter term as that will also influence the interest rate. If you are able to pay the loan back quicker will pay less of a fee for the loan.

Regular Payments:

Any loan that you secure will of course require payments to pay the money back. With a short-term loan sometimes, they can ask for repayments over a shorter time period. Instead of taking payments every month, some short-term lenders will start repayments every two weeks or even every week.

This is not so much a con, just something to be mindful of if you are looking for this type of loan.

Financial Difficulty:

A con with a short-term loan is that if you are not careful you can end up in more financial difficulty. You should only borrow when you know that you can afford the repayments and you should not borrow in desperation.

If you are having financial difficulties, then we highly recommend contacting a local citizens advice or a charity like Step Change.

They can provide options to you and let you know the best way forward.

It is far better to have a conversation with one of these companies before getting a loan and ending up in more financial difficulty.

Recommendations:

Getting a short-term loan can definitely help. They are a very popular way to get the money that you need and also pay the money back relatively quickly.

The main thing is to think about, so you do not end up getting into trouble financially:

What do you need the loan for?

Do you really need a loan?

You may be better borrowing the money from a friend or family if it is something urgent. This way you will not have to pay any interest rates.

Know EXACTLY how much you need?

Make sure you know exactly how much you are looking to borrow; this is very important, and you should also know your exact repayments as well. As mentioned above do not borrow in hope as that can end up making your finances worse.

As long as you make sure you spend some time thinking about what you need before you commit to the loan you should find it a fairly straightforward experience.

Other Options:

If you are unsure, you will be able to get a loan then you may want to consider looking at a credit union loan, you can read more about how a credit union loan will work here…

Essentially, it is a union that has been set up, normally locally and it will offer loan services and also savings services. They work a little bit differently to banks, but your money is protected when you use them.

This can also be a viable option for someone that is unable to get a loan through the standard means of a bank or other financial institution.

We hope this is helped explain the pros and cons of getting a short-term loan.

If you want a quick and easy decision and to see how much you can borrow, check out the apply page here at MoneyPig and we would love to help.