Short Term Loans: What You Need To Know

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short term loans

Short term loans are a way to get cash quickly when an emergency, unexpected bill or sudden cost comes up for which you didn’t plan and can’t afford to pay immediately. However, depending on your circumstances, short term loans might not always be the best choice. If you’re in a pinch and need some financial help, read our guide so you know when you might consider a short term loan.

If you’re interested in learning more, provide UK short term loans, both payday and instalment.

What Is A Short Term Loan?

There are a couple of different varieties of short term loans available, but they all have in common a short repayment period. This could be anything from 1 day to 6 months, depending on the loan, the lender and what you need.

Payday loans are the shortest variety of loans. These are so named because they’re intended to provide some quick cash in advance of your payday and are paid back in full once you’ve received your monthly paycheck. They usually vary in length between 1 day and 36 days.

Instalment loans run over a slightly longer period, although are still short term. They are intended to help you when you’re in sudden need of financial help, but they are paid back in monthly instalments, usually three. This can be a better option than payday loans if you’re unsure that you’ll be able to pay back the full amount of money in one go.

Short term loans are known for being an expensive way to get a loan because they have a high APR. This, however, is calculated for how much the loan would hypothetically cost over the course of a year. In reality, they are only intended to last a short period of time so aren’t always as expensive as they APR might imply. Typically, if you borrow £100 over the course of 10 days, you’ll likely have to pay back around £110.

What Are They Used For?

Short term loans are perfect for when you need money quickly. They provide same day bank transfers of cash so if something suddenly comes up, you’re able to pay. This could be anything from a repair on your car to a burst pipe in your home. They’re used to pay for things for which you didn’t expect and therefore couldn’t budget for, and things that can’t wait until after payday to do.

For example, you might also use a short term loan if you’re just got a new job and need to travel, but haven’t yet been paid. You know that you’ll be able to cover the cost when you are paid, but it ensures that you can get to work in that first month.

Short term loans should only ever be used when you know that you’ll be able to pay back the money after your next payday, or by the dates you’ve agreed with your lender.

When Not To Get A Loan

While short term loans can be great for some people, they’re not the answer for everyone and in all situations.

If you’re not sure you can pay it back

You should never get a loan if you’re unsure about whether or not you’ll be able to pay it back on time. All loans, short term or otherwise, get expensive if you miss repayments and that can land you in even more financial difficulty. If you’re not confident about making repayments on time, then seek financial advice from an expert, like the Money Advice Service, before you apply for any kind of loan.

If you don’t have to

Being in financial difficulty, whether it’s long term or just a pinch before payday, is stressful. Instant cash into your bank account can seem very appealing, but you should consider carefully whether you definitely need the money before applying for a loan.

You should have a specific reason for needing the money, such as a car repair, a specific bill or something similar. This ensures you only borrow the amount you need, so the cost of the loan is kept at a minimum. You shouldn’t get a loan if you don’t have a specific thing you need it for.

If you can wait to buy something you need until after your next payday then you should, even if it’s frustrating at the time! This means that you shouldn’t get a short term loan for luxuries or things that aren’t essential, like a new TV, a holiday or a meal out. It can be difficult to go without good things, but instead of getting a short term loan for these you should consider evaluating your budget to factor in saving for luxuries, or possibly using a credit card depending on your circumstances.

If you’re frequently reliant

This might seem counter to the point above. However, while it’s important that you only get a short term loan if you need one, if you frequently have to rely on short term loans then you should seek professional financial advice from a charity or other service. They might be able to help you with budgeting, accessing benefits or better managing your money so you can become more financially stable and independent.

Short term loans can be a great choice if you need a quick solution to a pressing financial problem and when you know that you’ll be able to pay the money back by your agreed date. If you’re looking for a FCA regulated and authorised direct lender, offer both payday and instalment loans.

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