With various financing products now available for different types of customers, getting access to financial assistance in a time of need has become much simpler than before. Short term loans are just one of these examples and are commonly used to cover unexpected expenses and emergencies, or simply to bridge the gap between paydays.
A short term loan is a form of credit that typically has a short repayment period ranging from anywhere between 3 to 12 months – depending on the provider. They are usually unsecured online loans and can be obtained from a number of different providers with a relatively simple application process via the lender’s website and a credit check.
Short term loans come in different shapes and sizes and for many people, this has given better access to credit. In the case of instalment loans, you repay a portion of the loan principle and the interest each month over an agreed period of time. The length of time that it takes you to repay the loan will depend on your agreement with your provider and sometimes on the size of the loan you have borrowed. For larger loan amounts, this can be a useful repayment method as the cost of the loan can be spread out into manageable instalments, enabling you to repay in a more affordable way.
Payday loans comparatively, are usually slightly smaller loans that are repaid the following month on your payday. This type of loan has historically been used by people needing to bridge the gap between paydays – hence it’s name. Whilst the basic payday loan model still exists, some payday loan companies have re-modelled their product over time - with some offering a repayment period of up to 3 months instead of the usual 30 day repayment period, in order to accommodate different needs.
Unexpected costs and emergencies can arise at any point and most times, these are usually circumstances that we can’t foresee. In such cases it can be difficult to suddenly have to divert your income to cover these expenses – it’s inconvenient and a lot of the time, unaffordable. This is when a short term loan could prove useful. You could cover your usual monthly expenses as well as the emergency expense and pay off your loan within a relatively short time.
Perhaps you underestimated your expenses for the month or didn’t factor in the cost of your annual MOT bill – either way, you’re frustrated and feeling stuck! A short term loan could assist in getting you through the rest of the month and you’d repay the loan once your payday arrives, or in instalments over an agreed period.
With summer coming to an end and our favourite holidays set to make their yearly return, many of us will want to start preparing – and rightly so. Whilst it’s never advisable to take a loan if you don’t really need it, a short term loan could be useful in helping you manage your expenses in the months leading up to celebratory periods like Christmas, New Year and even birthdays.
Applying for a short term loan is generally a very quick and simple process. Instalment loans and payday loans are available online so you will need to complete an application form, and then the lender will perform their checks. If you are approved for the loan, you can usually get the funds transferred into your bank account almost immediately, depending on the provider.
A short term loan can be incredibly helpful when used responsibly and repaid on time. However it’s important to spend time exploring your options and ensuring that you truly need the loan and can afford the repayments, as late or missed payment can cause serious money problems.
There is no one size fits all rule in any situation and the same runs true when it comes to deciding on the type of loan that works for your circumstances or if you even need a loan at all. Whilst a payday loan or an instalment loan might be suitable to cover an emergency cost, there are always other ways to borrow, which may be more suitable for your specific needs.
All you need to know about short term loans
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