If you’re amid a cash flow problem, and you need money fast, a short-term loan can be the answer. With minimal effort, you can be out of your financial hole and back up and financially functioning. The short-term nature means the problem isn’t hanging over you for years to come either. However, we understand that the world of short term loans, and payday loans, can seem bewildering. This guide will answer all of your questions, ensuring you feel confident that a short-term loan is the solution you’re looking for.
What is a Short-term Loan?
A ‘short term loan’ is simply one with short repayment periods. This may be as short as payday (a payday loan), or it may be 3-12 months. They are loans designed to get you out of a short term financial emergency quickly. Short-term loans are usually for £1000 or less.
Short term loans differ significantly from those offered by banks. A bank loan will typically be spread over a much longer repayment period, and require much more complicated application processes.
Can you get a Short-term loan with bad Credit?
Yes you can! Unlike a bank loan, short term loans don’t place as much weight on your credit rating. This is because the loan amount is typically smaller than you would be asking a bank for, the repayment terms shorter, and you are dealing with a specialist short term loan company.
Short-term loan Eligibility Criteria
Instead of penalising you for bad or no credit, short term loans are offered based on factors such as employment. Our eligibility criteria for short-term loans is:
Being over 18
Being reliably employed
Being a resident in the UK
Having a UK bank account wages are paid into
Having an email address
Being employed and earning over £500 per month
For many individuals, it is their bad credit rating which puts them off applying for a loan to get them out of their financial fix. However, often this fear is unfounded. Whilst it is the loan company’s responsibility to check that you will be able to repay the loan, the information used for this is based more on the here-and-now, and your commitment. Information in your application, as well as a credit check, will determine your eligibility for the loan.
This makes short term loans a valuable option compared to conventional lenders who don’t typically arrange loans for those with low, bad, or no credit. Whilst you may be able to improve your credit rating over time, this isn’t possible as quickly as you may need. Even if you have been denied a bank loan, don’t despair, you may well be eligible for a short-term loan.
Benefits of Applying for a Short-Term Loan Online
The benefits of a short-term loan include:
Speed: The single biggest benefit is rapid access to money to help you out in an emergency. You won’t be bogged down in a complicated application process. For example, applicants through MoneyPod can expect a decision to be made on the same day of application. Furthermore, once you are approved, the loan payment is completed very quickly, typically on the day of application.
No Collateral Needed: Traditional loans will use something you have, such as your property, as collateral. That item is then at risk should you be unable to repay the loan. Short term loans don’t work in the same way. Whilst of course you are still liable for paying off the loan, you don’t stand to lose your home in repayment.
Loan with Poor Credit: You can apply for a short-term loan even if you have a bad credit rating, or no rating at all. We simply need to check you’ve got a regular income, versus what you’re paying out in terms of any existing loans. Even if you have a poor credit rating you are likely to be eligible for a short-term loan.
Short Term Commitment: With a short term-loan it should all be over and dealt with quickly. Once you’ve repaid and you’re back on track financially, you’re no longer committed.
Flexibility: Short term loans are inherently more flexible than longer term options. You can find a loan which suits your current situation, with the best short-term repayment options for you.
Costs and Interest: Whilst short term loans will have higher APR, because the loan is for a much shorter period, this can work out as less over time compared to a lower APR over a longer repayment period. If you’re comparing the two, you get a more accurate picture of costs if you look at the total amount repayable.
Should I take out a Short-term Loan?
Short term loans work best when you have a fixed financial need, of a relatively low amount, with a definite means to pay. This is why they are often interchangeable with payday loans. They are, for example, ideal if you have three weeks until payday and the washing machine has broken.
You shouldn’t, however, use a short-term loan as a means to paying off another loan.
What is the Difference Between a Short-term loan and a Payday Loan?
A payday loan is a form of short term loan. Payday loans are designed to be paid back very quickly, as soon as your next pay cheque comes in, typically within a few weeks.
A short-term loan, whilst incorporating payday loans, may have repayment terms that are still short term, but longer than your next pay day. They may require repayment within a month, three months, or even up to a year.
What are the Normal Payment Periods for a Short-term Loan?
The majority of short term loans are payday loans and will be paid off on the first payday following the loan payment. These loans are very short term and designed to bridge a gap in cash flow.
Other short term loans may have slightly different repayment periods. They may be for three months, six months, or anything up to a year.