⏱Last Updated on
What are short term loans? A short term loan is when you borrow an amount of money and have to pay it back over a length of time between two months and one year.
How do short term loans work?
Short term credit is different to payday loans. With payday loans, you borrow money and pay it all back within 30 days. For first time users, payday loans generally allow you to borrow between £50 and £400.
If you use a short term loan, you can often borrow more than you could if you were taking out a payday loan. With short term credit, you can generally take out amounts ranging from £80 to £2,000.
Advantages of short term loans
Short term credit gives you access to small amounts of cash when you need it.
Very few high street banks will lend amounts of say, £200 or £400. Their systems are only set up to cope with loan applications for five or ten times that amount.
With payday loans, lenders ask you to pay off everything – the loan and the interest – all in one payment, usually a month or so after you took the loan out.
Paying it back all at once can put some borrowers under a lot of pressure. Meaning for many people, longer repayment terms are better.
Having more time to pay your short term loan back means your monthly repayments could be lower.
You’ve got to do what’s best for your personal circumstances but if you’ve found yourself temporarily short of cash, making 2 or 4 or 6 repayments may be better for you than just 1 big repayment to get you over your short term cash flow issues.
This type of short term credit is also very flexible. You can usually pay it back early with no settlement fees to worry about. You’re in control.
Disadvantages of short term loans
For larger amounts, like £2,000, taking out a short term loan can be more expensive than using your bank overdraft or your credit card.
That said, most people know that unauthorised bank overdraft charges (that’s where you borrow past your limit) can be eye-wateringly expensive.
It’s always wise to compare because, sometimes, it’s cheaper to take out short term credit than it is paying the daily penalties that your bank may charge for an unauthorised overdraft.
Is a short term loan right for me?
Short term credit isn’t right for you if it’s something you end up using again and again. For one-off expenses where you need cash quickly, they can provide a convenient and affordable solution.
The main reasons people take out these types of loan include:
• Paying urgent bills
• Medical treatment
• Funeral expenses
• Car repairs
• Home improvements
• Unexpected loss of income or non-receipt of salary
Short term loan interest rates
Short term credit companies offer their borrowers a variety of different interest rates. The rate you’ll end up paying all depends on your personal circumstances and the actual loan provider who gives you your short term credit facility.
At CashLady, the minimum APR (or interest rate) you’ll pay is 68.7% and the maximum is 1,295%. If you approach some short term loan providers direct, you could end up paying much more like 1,509% at Wonga Loans.
It’s always wise to shop around.
Short term lenders have to treat you fairly. In 2016, the Financial Conduct Authority, the part of the government that polices the industry, laid down tough new laws for any company offering this type of short term finance. The new rules include:
• Interest and fees charged to borrowers cannot be any higher than 0.8% per day of the amount borrowed
• Default fees must not exceed £15. A lender can continue to charge interest after a default but this must never be higher than the initial rate
• Borrowers will never be expected to pay more in interest and fees than 100% of the amount they borrowed. So, if you borrow £200, you’ll never pay more than £200 in interest and charges.
Short term loan providers are keenly aware of their duty to lend responsibly. It’s in everyone’s interest that anyone taking out short term credit can pay back what they owe when it’s due.
Short term loans vs long term loans
Short term credit has some advantages over long-term loans.
Long-term loan providers, like banks and building societies, have a higher minimum lending amount. What that means is that you might want to only borrow £800 but the bank might not consider you for any loan less than £2,000, for example.
Many people only want to borrow an exact amount for a specific reason and don’t want the temptation of having more in their bank than they need.
Short term credit providers offering 3-month loans, 6-month loans, 9-month loans, and 12-month loans will lend much smaller sums of money than banks and building societies will.
Short term loans quick approval
Applying for short term credit with CashLady is quick. You have to be 18 years or older, a resident of the UK, and in employment (earning at least £500 a month). You’ll also need your address details and your mobile phone number to hand.
Decisions can often be made in minutes and your short term loan could be in your bank account within an hour of your application (if your bank accepts faster payments).
Short term loan applications with CashLady
You can apply for short term credit either directly with a lender or via an FCA authorised broker like CashLady.
At CashLady, we have a panel of 15 different lenders we trust. They treat their customers fairly, they have excellent reputations, and we’re really happy with the level of service and attention they offer to borrowers.
More than that, we don’t do business with any lender that charges any upfront fees. The CashLady service is free to use for you, regardless of whether you get an offer or you take out a loan.
Once we have your details, our computer matches you with short term credit providers whose “profile” you match. Each lender has different lending criteria and we make sure we only introduce you to the lenders who want to hear from you.
To read more about short term small loan applications with CashLady, please click this link. If you’re ready to apply now and want to be matched with the most suitable lender, just complete the quick application form online to get started.