Who Can Use A Short Term Loan
Anyone can apply for a short term loan as long as they are over the age of eighteen. A short term loan is often referred to as payday loan or cash advance and they are generally very easy to obtain from a loan provider. Today short term loan providers are part of a rapidly growing finance industry in the UK. The number of payday loans being used by the public has increased significantly in the last few years. It is estimated that the average payday loan is around £300 and the people borrowing the money earn below £25,000 pa.
Short Term Loan Is Secured By Your Next Pay Packet
A short term loan is secured by the borrower against their next wage payment. The normal period of a short term loan is up to 31days. As the term suggests they are a loans for a short term period and should not for a long periods of time. The reason for this is due to the high cost of borrowing the money which is on average around 1737% per year although interest rates of 4,214% are not unheard of.
Often the borrowers use a short term loan to get them over an unforeseen shortfall in their finances as they are quick and easy to obtain. Do not enter into a short term loan unless you have the money available to repay the loan back within a few weeks or a month. No matter how under pressure you might feel to borrow the money you do need to consider how you will repay the money back.
One of the reasons for such high interest rates for borrowing money with a short term loan is due to the number of people who default on their payments. The finance providers say that their costs for processing short term loans is significantly higher than any other types of loans and their risk of people defaulting is far higher than conventional loans as they do not carry out full and comprehensive credit checks on new applicants
The Benefits of Short Term Loans
- Short term loans are very easy to obtain.
- They are secured against your future pay check and you are not normally asked for any other collateral to secure the loan.
- They require very little paperwork to be done and a signature is all that is required to secure the loan.
- Once a short term loan has been agreed the money is available the same day.
The Disadvantages Of Using a Short Term Loan
- They are very expensive
- The payday loan provide will quickly investigate your credit history
Use A Comparison Website To Find Your Next Short Term Loan
Due to the high number of short term loan providers you are advised to shop around for the lowest interest rates as lenders are not restricted on the amount of interest they may charge for a payday loan. However under current legislation they do need to state the (APR) annual percentage rate that applies to the loan. Next time you are looking for short term loans consider using a comparison website for finding the best short term loan for your circumstances.
Comparison websites that compare Payday loans offer you information about each of their short term loan providers. They provide the following information:
- The speed of their decision making
- The documentation required
- how much you can borrow
- The term of the loan
- The interest rate charged
- The total charge for borrowing the money
- The total amount to be repaid
- In some cases they may even provide a promotion code that could save you money on the initial finance charge
- When to expect the money in your bank account.
Finally when considering a short term loan never use a short term loan to pay off another payday loan. Always consider other ways of raising the money you need either by borrowing money from family and friends or just by asking for some extra hours at work. If you have any experience of using a short term loan then please leave a comment below.