Short Term Loans
Broken down fridge freezer made a flood in your kitchen? Maybe a massive vet’s bill just landed on the mat thanks to your unlucky-in-action pooch?
loans can be handy for getting you, or the family pet, out of sticky situations. When you want to borrow a smaller amount of money to tide you over or need to fix a problem fast, there are a few ways to get a personal loan under your belt.
Sit back and soak up the vitals of short term loans…
What is a Short Term Loan?
If you thought a short term loan was just a personal loan that’s not as large or lengthy, you’d be partially correct. Short term loans are generally for smaller amounts, usually under £3,000 but they could be as small as £100. Payday loans and bridge loans for homes are specific types of short term loans, which we’ve got some great guides on too.
However, if you’re hoping to borrow a relatively low amount for around three months to a year, a short term loan might be for you. They’re designed to give a bit more flexibility than a payday loan, so you get a little longer to pay them back and don’t need to drain all the cash from one month’s salary. This hopefully means it’s less likely that you’ll need to renew the loan or borrow more to pay it back. This sort of borrowing can cause your finances to spiral out of control like a badly ridden camel. No one wants that.
Short term loans: a summary
- Usually repaid in less than 12 months
- Usually for amounts under £3,000
- More flexible than a payday loan
- Often have higher interest than longer term loans
Short term loans tend to be processed very quickly, though they are subject to high-interest rates compared with other types of borrowing. With a longer-term loan, providers have more time to collect interest, so they make short term loan rates higher to make lending more worth their while. This is why short term loans are really only for emergency lending – those times when your rainy day fund has already been emptied and you’re out of other options.
If you take out a short term personal loan you should be completely sure that you can afford to pay it back. You also need to be aware that taking out short term loans can have a negative impact on your credit score as using them is seen as evidence of money management problems. They’re definitely not something you want to dip into regularly, but like other types of borrowing, they can be useful in certain situations.
Compare Short Term Loans
The annual percentage rates (APRs) on some short term loans look pretty crazy when you see them written down, but you still need to compare them and be aware of them as part of the bigger picture. When you’re searching for a short term loan, you may also find you need to meet specific criteria to qualify for certain products.
If time is of the essence, take a look at how quickly the money could be with you too. will also take your credit score into account when considering your eligibility for different products. Take the time to check yours and correct any errors if possible, it could help you get a better deal.
Arrangement Fees for Short Term Loans
When you’re comparing short term loans, something you’ll want to scrutinise is whether there are any arrangement fees or early repayment fees on different loans. You don’t want someone dousing your flames of giddiness if you find yourself able to pay extra off your loan or to settle it early.
Make sure you compare total costs of loans on our moneymatcher and look at information on any extra fees too. Short term loans are covered by the payday lending loans cap, which means that the maximum amount you should ever pay back is twice what you’ve borrowed. That said, if you run into trouble and fail to meet your payments, your credit rating and financial situation could both take a big knock.
Is a Short Term Loan Right for Me?
To take out a short term loan you’ll need a regular monthly income to be sure you can pay it back. Lenders tend to ask for your bank card details, which means they can take your payments straight from your bank account through a Continuous Payment Authority (CPA). In theory, this makes getting your money to the easier, but not if there’s no money in your account. You, therefore, need to plan your budget carefully.
Alternatives to Short Term Loans
If you need some money for an unexpected event, as an alternative to a short term loan you could ask your bank to extend your overdraft. You could also explore the option of taking out a 0% credit card, if you can pay for the things you need on plastic. If not, a money transfer credit card (the type you can transfer the balance into your account) may be something to consider.
If you get one with a 0% period you’ll generally only pay a small percentage for the transfer itself. Just make sure you can pay the money back quickly and transfer, as withdrawing money from a credit card is a whole other expensive ball game!
When you’re confident a short term loan is right for you, make sure you have an exit strategy in place so you don’t need to rely on borrowing in the future. Pay off your loan on time and start topping up that rainy day fund in case of future problems.