How do short term loans work?

How do short term loans work?
July 17, 2017 Stacey Corrin

How do short term loans work

Short term loans are designed with you, the borrower, in mind. But how do short term loans work? This is everything you need to know.

Not everyone wants to borrow thousands of pounds over four or five years. But for a long time, that’s really the only choice that British consumers had.

Banks and building societies generally wouldn’t look at loans less than £2,000. Also, your credit rating had to be very good to get your hands on any money.

Things have changed a lot since those days and you now have more choice than ever before. Here is CashLady’s two-minute guide to short term loans.

Short term loans UK

About ten years ago, a group of companies decided to change the way money was lent.

They offered short term credit, lending consumers as little as £80 as and when they needed the money.

To many of them, it also didn’t matter if someone’s credit report was less than perfect. They were more concerned about whether they could afford to pay back the loan they wanted now.

For most people taking out a short term loan, the amount of money they ask for is between £80 and £2,000. The loan lasts anywhere between two months and twelve months.

You can get approved for a short term loan quickly and it can often be in your bank account within the hour.

Banks and building societies normally prefer to lend big sums of cash over 3-5 years to customers looking to do expensive things like add a new conservatory to their house or get the latest car.

Short term loan providers are different. They’re set up to help customers out at very short notice who want anywhere between £80 and £2,000 in an emergency.

How can I use a short term loan?

Short term credit means you can borrow small for the things you can’t plan for, like:

• a sudden big mobile phone bill you weren’t expecting,
• having to cover funeral expenses,
• your car breaks down and you need it to get to work,
• someone left the bath running, water’s seeped through the floorboards, and you need to get the place fixed and the mess cleaned up, or
• out of the blue, the company you work for hits cash flow problems and your wages aren’t paid when you were expecting them.

How do short term loans work?

First, decide how much you need to borrow. Do you want a £100 loan? £200 loan? £300 loan? Work out exactly what it is that will give you the cover you want.

Then work out how much you can afford to pay back each month. Be careful to make sure that you don’t overstretch yourself.

So, if you want £500, how long should your loan be? This table gives you an idea of the monthly repayments you’d have to make to a short term loan company – just choose the level you know you can afford…

MonthsAmount
2 months£366.82
3 months£246.33
4 months£194.76
5 months£167.81
6 months£142.66
7 months£123.66
8 months£108.80
9 months£97.00
10 months£87.62
11 months£80.27
12 months£73.67
The figures shown above are accurate for a lender charging at an annual interest rate of 292% fixed or 1,186% APR.

What you’ll actually pay depends on the interest rate charged on your short term credit facility by the provider you choose. So if they charge lower interest, you won’t pay as much. If they charge higher, you’ll pay more.

Please remember that the longer you take your short term loan out over, the more you’ll end up paying over time, even though your monthly repayments are lower.

What protection do I have with shWhat protection do I have with short term loansort term loans?

CashLady (an FCA authorised broker) and our FCA regulated short term credit providers are responsible lenders. Please only borrow what you can afford to pay back.

If you do fall into arrears, you are protected from charges and interest getting out of control.

If that happens, what might you have to pay?

Your lender can charge you £15 for a default notice but no more.

The short term credit company you use can continue to charge you interest if you default but the interest rate they charge can’t be any more than the interest rate you were paying before you defaulted.

And finally, the amount of total interest and default fees you pay can’t come to more than the size of the original loan. So, if you borrowed £100, you will never pay more than £100 in interest and default fees.

Short term loans – direct lenders

There are two ways you can apply for short term loans – directly to the lender themselves or through a service like Cashlady.

If you apply direct, once you’ve entered the amount you want to pay and the length of time you want to pay it back over, the short term credit provider is going to want to know:

• Your name
• Your mobile telephone number
• Your address and whether you have a mortgage or you’re renting
• How much you earn every month (usually they look for a minimum of £500)
• The name of your employer
• What your monthly outgoings are like (mortgage/rent, rates, gas, electricity, and so on).

Short term loan applications with CashLady

Short term loan applications with CashLady

If you use Cashlady to apply for your short term loan, we’re going to need exactly the same information.

So what’s the benefit to you coming through CashLady rather than going direct?

CashLady is an FCA authorised broker and we work with a panel of different short term loan providers that we trust. They play fair, they don’t charge upfront fees, and they all passed the stringent checks that the Financial Conduct Authority made them undertake when they took over from the FSA in 2014.

Each of these lenders has different types of customers they like to lend money to. We work closely with each short term credit provider so we present you to the ones we believe you’re most likely to get a “yes” from.

CashLady’s service is free to you and because your loan application is considered by our panel, we think you have a better chance of getting what you want – e.g. getting a positive decision.

Because we work with so many providers, we can confidently say our acceptance rate is better than any single direct lender.

Short term loans quick approval

Once you’ve made your loan application, either directly or through CashLady, there are three possible answers you can get.

You’ll get a “yes” or a “no” straight away. If it’s a “yes”, you’ll have to agree to the terms and conditions of the loan offer. When you do that, your money could be with you within an hour.

The other response is “under consideration”. That means that the lender is weighing up your application but they need a bit more information.

In those cases, make sure you’re contactable by phone or email. Give them the extra details they need when they get in touch and they’ll make a decision for you very quickly.

Apply for a short term loan

Ready to apply now? Want to work with CashLady who will take your details and present them to the short term credit providers we think will be most likely to want to lend you money?

Click here to apply for a short term loan with CashLady.