What’s the difference between payday and short-term loans?
The main difference between payday and short-term loans is how long you have to repay the money.
Payday loans, as the name suggests, are typically repaid in full, plus interest, within a month.
On the other hand, short-term loans come with a choice of repayment durations.
The short-term loan repayment terms available to you will depend on the amount of money you apply to borrow and could range from a number of months to several years.
Is a payday loan a type of short-term loan?
Do short-term payday loans exist?
A payday loan is a type of very short-term borrowing. This type of loan may not be suitable for everyone.
Payday and short-term loans are designed to cover the cost of unexpected expenses. Common reasons for applying for short-term credit include car repairs or an unplanned bill.
Are short-term loans better than payday loans?
No type of loan can be described as ‘better’ than another, because what works for one borrower won’t necessarily be a suitable option for another.
When thinking about the type of loan that you’d like to search for, you should carefully consider your financial situation.
A payday loan could be suitable if you’re confident that you could repay the full amount within a month. If you’re hoping to pay the money back over a longer period of time, a short-term loan might be something to think about instead.
Are payday loans still legal in the UK?
Yes, payday loans are still legal in the UK, although rules introduced by the Financial Conduct Authority (FCA) in 2015 have resulted in tighter borrowing restrictions.
These rules were put in place to ensure fairer, safer, and more transparent lending for borrowers.
Before you make an application for any type of loan, you should ensure that the lender or broker you’re applying with appears on the FCA register. You can use the free FCA Firm Checker tool to confirm this.
For your peace of mind, all the lenders on the CashLady panel are authorised and regulated by the FCA.
What sort of loans could I search for with CashLady?
The lenders on the CashLady panel offer short-term loans between £100 and £10,000.
Depending on the amount of money you apply to borrow, you could repay your loan over a term of 3 to 60 months.
CashLady does not work with any payday loan lenders.
Who can apply for a loan?
If you’re wondering, ‘can I apply for a loan?’ it’s important to remember that every lender will have their own eligibility criteria that must be met before you can make an application.
Generally, to apply for a loan, you must:
- Be over the age of 18.
- Be a UK resident. Some lenders will ask for 5 years’ UK address history.
- Have a UK bank account and a valid debit card; and
- Have a regular source of income paid into your bank account. Some lenders may have a minimum income requirement.
Short-term loans for bad credit vs payday loans for bad credit
Your credit score plays an important role in your application. When you apply for a loan, the lender will look at your credit history as part of their creditworthiness assessment. Finding a loan could be difficult if you have bad credit; however, whether you’re searching for payday loans for bad credit or short-term loans for bad credit, some lenders could be willing to consider your application.
CashLady works with several lenders who specialise in short-term loans for people with bad credit.
It’s worth noting that a bad credit loan, whether that’s a payday or short-term loan, could come with a higher rate of interest.
Choosing your repayment term: short-term loan vs longer-term loan
There are advantages and disadvantages of both shorter and longer term loans, and these will vary from person to person.
Things to think about with a short loan term: for example, 3 months:
- Your borrowing will be repaid more quickly.
- Your monthly repayments will be higher, but the overall cost of borrowing will be lower.
Things to think about with a loan with a longer term: for example, 3 years:
- You’ll have more time to spread the cost of borrowing. The longer the term, the more interest you’ll pay.
- Your monthly repayments will be lower, but the overall cost of borrowing will be higher.
Is it quicker to get a payday loan or a short-term loan?
When applying for any credit product, it’s crucial to take your time and carry out thorough research. A loan is a serious financial commitment, and applying for one should not be rushed.
If you need money fast and are certain that a loan could be suitable for you, CashLady could help you search. Our online form can be completed in under five minutes, 24 hours a day, 7 days a week, at a time and place that suits you.
If your application is approved, some of the lenders on our panel could send your money the same day. Please be aware that the time it takes for the money to reach your account will depend on your bank’s policies and procedures.
What happens if I can’t afford to make my monthly repayments?
If you’re finding it difficult to make your monthly repayments, you should contact your lender as soon as you can.
Talking about money can feel awkward, but it’s vital to remember that your lender is not there to judge you or your situation; instead, they will be keen to work with you to figure out the next steps.
Money worries? Please don’t suffer in silence. You’re not alone, and you have nothing to feel ashamed of. Money worries are common; in fact, over 17 million people in the UK report struggling with financial anxiety on a daily basis.
Free, impartial, confidential financial advice can be accessed through the following charities and organisations: StepChange, MoneyHelper, Citizens Advice, and National Debtline.