There is nothing worse than being tight for cash and having some financial emergencies come up. We’ve all been there, whether it’s from back when you were in your student days, or something you’ve struggled with as an adult, there’s few things more stressful.
Short term loans allow you to borrow money for a short period. These can be extremely helpful in the right situation, though you should always ensure they are the right choice for you. I’ve teamed up with cashasap.co.uk, direct lenders of short term loans, to help you understand the different types of short term loans and if they’re right for you. Keep reading for all you need to know about the types of short term loans.
What is a Short Term Loan?
A short term loan is a way to borrow money for a short period of time. They are intended for people who need to cover sudden expenses for which they didn’t budget. For example, if you have to have an emergency car repair that needs to be fixed immediately but don’t currently have the funds for it. They’re not for luxuries or anything that can wait until your next payday, but instead for immediate expenses that you can’t get by without. Short term loans come in two varieties: payday loans and instalment loans.
The amount you can borrow through a short term loan will vary between different direct lenders, but usually ranges between £100-£500 for first time borrowers, with most lenders increasing the limit if you’re a returning customer.
Payday loans are intended to get you through to your next payday when a financial emergency comes up at an inconvenient time. You pay them off in one single payment on the date specified by the lender. These must be paid off by the date agreed, and can last anywhere from 1 day to 36 days, so you’re covered until your next payday.
Similar to payday loans in terms of how much money is available to borrow, instalment loans are also for emergency financial situations. The difference is that they are designed to be paid off in a series of monthly instalments, rather than all at once. Instalment loans are typically paid off in three instalments, though this does vary depending on the lender.
They’re a great choice for spreading repayments if you know that you can’t necessarily afford to repay the loan in one sum, but can definitely do it in a few smaller sums. However, they do end up costing more than a payday loan as you’re borrowing money over a longer period.
Often, installment loans are a more expensive way to borrow than payday loans. This is because you end up having to pay more due to the fact that you are borrowing over a longer period of time. There is, however, the advantage of being able to spread the cost of repayments rather than a bulk one off payment.
Buying on credit is an alternative to a loan. You’re still technically borrowing money, but there is no fixed repayment date (although there will be set minimum repayments). This can be a good alternative to a loan, but it doesn’t suit everyone as it’s more appropriate for smaller purchases as they can get expensive if you borrow over a long period.
Whether it’s a payday loan or an installment loan, you should always ensure you are in the right situation to get one before you apply. Due to their expensive nature, these types of loans should only be used in emergency and if you are sure you will be able to pay them back in time.