Short term loans are very popular in the UK, offering a simple and fast way to cover a gap in household or personal budgets. Whether you’re having a tough month in terms of budgeting, or you’re finding yourself facing an unexpected expense, there are many reasons to think about short term financing to help bridge the gap. There are a number of different options available when it comes to these loans, including payday loans, instalment loans and guarantor loans.
Different types of short term loans
Payday loans – these are the shortest term loans available, usually borrowed for around a month. Small cash sums can be used to tide you over until your next payday when the loan is repaid. These loans are ideal for very short term borrowing when you don’t want to worry about multiple repayments over a long period of time. There are numerous lenders should it pays to compare payday loan offers before committing.
Instalment loans – for short term borrowing over a slightly longer period (a year or more), instalment loans are ideal. Sums of £1,000 and upwards are paid back over a period of time that works with your finances.
Doorstep loans – if you don’t have a perfect credit score then doorstep loans allow you to borrow £100 and upwards. You don’t need a bank account as the lender’s agent will bring the cash to you. Then they revisit each week to collect a small repayment.
Reasons to consider a short term loan
The options above are just three of the short term loan solutions available to anyone who doesn’t want to commit to borrowing over several years. But what are the advantages to applying for a short term loan?
1. Short term loans are unsecured. As they are usually for smaller sums, and borrowed over fewer months or years, they tend to be unsecured i.e. you don’t need an asset – such as a house or car – to be able to borrow a short term loan. Instead, a decision is made about whether you’re eligible to borrow based on factors such as your credit score or whether you have someone who is willing to guarantee the loan.
2. Short term loans are available quickly. One of the defining features of short term loans is that you can borrow them fast – sometimes even on the same day or within 24 hours. This makes financing, such as payday loans, ideal if you find yourself in a situation where you need cash fast.
3. There is no longer term commitment with this type of loan. With short term loans you only need to focus on the immediate future as the loan is paid off within a much shorter space of time. Many people find it intimidating to commit to borrowing over a period of many years, worrying about making the payments and managing the loan with all of life going on around. With short term loans this isn’t an issue as repayment terms can be as short as a month, leaving you free to repay and move on.
4. Short term loans could cost less. The longer you borrow for, the more interest you will pay. Short term loans offer a simple way to borrow the cash you need and to pay less for it – the shorter the term over which you borrow the money, the less interest you will pay. As you have not secured your home or car with short term borrowing there is also less risk of losing them if you cannot make repayments. While you should always make sure that you only borrow what you can afford to repay, avoiding the risk to your home or car that some longer term loans create can take the pressure off for many people.
5. You can use short term loans for anything. Most people use short term loans to help bridge a gap in monthly finances, to pay for something urgent or to cover an unexpected cost but the great thing about short term loans is you can use them for whatever you need.
6. There is plenty of choice. The three types of loans mentioned above are just some of the short term loans on offer and illustrate how this type of lending caters to all needs. Other options include doorstep loans, where your borrowing and repayment is all managed face to face via a loan agent – repayment could be as little as three months. Whether you have a bad credit score, you’re a first time borrower, you don’t have a bank account or you don’t want to have to deal with mainstream lenders, there are plenty of short term loans on offer to suit your needs.
Note: As with any borrowing lenders will consider your ability to repay (i.e. a loan’s affordability) as much as your credit history. Please expect to be asked to provide income and expenditure information.
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Oliver Jones has written for Solution Loans since 2016. His passion for personal finance comes through in the 200+ blog posts he's written since that time. His talent for explaining all things money means he's covered topics as diverse as...Read more about Oliver Jones