If you’re looking for money to tide you or your business over for a short space of time, there are many different flexible short-term loan lenders available here in the UK to choose from.
About 25 years ago, the first cheque-cashing shops started to open up here in our country. For a percentage of the value of a cheque, you could receive money straight away to spend, usually in cash. Then, when your pay landed in your bank account, the cheque-cashing company would receive their payment from your bank.
The market has changed a lot since the early 1990s. There are many more options open to consumers and businesses who need money in a hurry to meet an unexpected expense or a bill.
In this article, Moneypod looks at the different types of short term loan options available to, first, businesses and second, consumers.
Flexible short-term business loans
If you want a short-term loan for your business, there are companies which will offer you the money for a period of between one and twenty-four months. Traditional banks and building societies generally want to lend money over a longer term so, if you’re looking for this type of help, you’ll have to look to one of the newer lenders or “fintech” (financial technology) companies to get started.
For many companies, getting the money out over a shorter term works out better. There are fewer repayments you have to make and when the loan is completed and paid off, your monthly fixed costs reduce permanently. However, shorter repayment times do mean that the amount your business has to find every month is higher and that might mean tighter cash flow for a time.
The main types of short-term finance offered to businesses are –
Standard short-term loans – lasting between one month and two years where you make a repayment at the end of every month.
Overdrafts – an overdraft as an agreement where your business can spend more money than it has in the bank. You pay interest on the amount that you are overdrawn each month so this means that, when you’re not using your overdraft, you don’t pay a charge (other than your annual fee). Overdrafts can be withdrawn at any time.
Merchant cash advances – if you take credit or debit card payments in your business, you can borrow money against future card payments with a merchant cash advance. These are normally paid back over 9 months and how much you repay is a percentage of each day’s credit and debit card payments.
Invoice factoring – when you send an invoice to a customer, that invoice has a value. An invoice factorer will buy the invoice from you for a fee. When they’ve bought the invoice, they will send you 80-95% of the value of the invoice straight away, paying you the remainder minus their fee when the customer has paid.
Business credit and charge cards – just like personal credit cards, you can spend money on goods and services for your business and pay it back over time. You pay interest on the balance of your card every month (your balance is the amount that you owe the credit card company). With a charge card, whatever balance is on your card is paid back in full every month.
As you can see, there are many different financing options open for businesses. For consumers looking to borrow money for a short space of time, there are two main options – payday loans and short-term loans.
Are payday loans flexible?
With a payday lender, you borrow a sum of money and agree to pay it back on a certain day and, in addition to the amount of money you’ve borrowed, you pay a little bit of interest on top.
With a payday loan, there is only ever one repayment and you’re expected to make that payment in time and in full. There is no flexibility in how much you pay back or when you repay it with a payday loan.
How flexible are short term loans?
Short term loans are very different to payday loans.
With a short term loan, you can borrow between £500 and £10,000 over a period of between three months and twenty-four months. The longer you borrow the money for, the lower your monthly repayment is.
In comparison to payday loans, short term loans offer much more flexibility. How that helps borrowers is that, with a payday loan, paying back all the money in one go with interest on the top can leave a person struggling the next month.
Short term loans v payday loans
Both short term loans and payday loans do offer lots of flexibility in other areas. There are two big questions for a potential borrower to ask themselves when considering taking out a loan –
- How much do I want to borrow??
- When I pay back the loan, I don’t want to financially struggle to meet the repayments. How much can I comfortably afford to pay back every month
Both short term loans and payday loans offer the flexibility of choosing the amount of money you want to borrow (within a short term loan provider or payday loan provider’s range of loan sizes).
Short term loan providers and payday loan providers also offer the flexibility of being able to get your hands on the money, sometimes within minutes. You don’t have to queue up at the bank and wait for an appointment to see the manager. If your car breaks down at eight o’clock on a Monday morning and you apply for a short term or payday loan, you can often have the money by nine o’clock.
Both short term loans and payday loans offer you the chance to pay back your loan early saving you money on interest charges. For example, if you took out a 12 month short term loan but, in the seventh month, you had the cash to pay it all off, you could. Better still, you’d save yourself five months’ worth of interest payments too.
For flexibility, short term loans offer you more though.
Your short term loan offers a repayment schedule of between three months and twenty four months. You can often borrow much more on a short term loan as well than you can with a payday loan.
Short term loans are also gaining in popularity over payday loans meaning there are a lot more short term lenders out their competing for your business than ever before.
If you want to apply for a short-term loan now, use Moneypod and we can select the FCA-approved, reputable short-term loan provider that’s right for you and your circumstances. Please click here to start your no-obligation application.