Short term loans can offer quick financial solutions for unforeseen expenses, ideal when you have no other better options. For many people, they provide immediate financial relief, however, it’s crucial to compare their initial benefits against any potential drawbacks so that you can make an informed decision. If you’ve been looking for a short term loan lender that can provide a small cash amount to help you, here’s what to keep in mind before you apply.
What Are the Benefits of Short-Term Loans?
During financial emergencies, short term loans come into their own, offering a few clear advantages over traditional lending options.
Firstly, they provide quick access to funds when urgent expenses or emergency bills need to be resolved fast. This can be anything from repairs to your car, around the home like a boiler failure, or other types of unexpected bills that you cannot delay.
Unlike options like a personal loan that may involve a lengthy approval process or waiting for paperwork to sign, short term loans often have a much more streamlined application process that is fully online, meaning you can get approval and same day cash from many lenders.
Short term loans also tend to have more flexible eligibility criteria compared to long-term financing options. Those with varying credit histories or a low credit score may find they are still eligible despite this, making them accessible during times of need. If the lender can see the loan repayments are sustainable, they can often still approve a loan even with a poor credit history. Add to this the ability to choose shorter loan repayment terms, hence the name, they can be ideal when you just need a few hundred pounds and can repay this over 3 to 6 months.
What are the Drawbacks of Short-Term Loans?
While short term loans can offer immediate help when you need it, like any form of borrowing, you’ll need to consider a few things first.
You may find some short term lenders will charge higher interest rates than others when compared to traditional financing options. Due to their shorter repayment terms and convenience, some lenders will often charge higher interest rates, so it is important to compare your options before going ahead.
Borrowing a short term loan for the right reasons is important too as this will avoid falling into a debt cycle that can be difficult to get out of. Becoming too reliant on credit options like this should be avoided, and instead, it’s important to only use them for short term situations like unexpected or emergency bills. Short term loans are not designed to be used for regular payments, non-essential expenses or any long-term financial issues.
If you are someone looking for a higher value loan, generally short term loans are only available for amounts up to a maximum of £1,500, but this can vary between lenders. As they are for short-term essential circumstances, anything higher than this or for other means like home improvements or paying for a holiday would mean looking at other types of borrowing like a personal loan that can offer longer repayment terms.
Lastly, failing to sustain repayments on a short term loan can negatively impact your credit rating and lead to late payment fees, making it harder to secure credit in future, for example, when looking to get a mortgage. When choosing repayments, be sure that they are affordable for you and will not become a struggle throughout the loan term.
Should You Get a Short Term Loan?
By considering both the benefits of having quick access to funds against the repayment terms and interest charge, you should assess your financial needs and capabilities first before going ahead. When used as intended, short term loans can be an ideal and helpful option during emergencies, especially if you do not have enough savings to help or the bill cannot wait until your next payday.
Make an informed decision and compare lenders, using only those authorised by the Financial Conduct Authority (FCA). This way, you can make the best choice for you to help you out of a short term financial position.
