Short term loans can seem a bit daunting. However, once you’re fully informed on what they are, what they’re useful for and when you should look at other options. You’ll be able to decide whether or not they’d be a helpful way for you to manage your financial circumstances. I’ve teamed up with cashasap.co.uk to bring you this quick guide on short term loans.
What Is A Short Term Loan?
A short term loan is a way to borrow money over a short period of time. This can be anywhere from just one day up to three months. They’re one of the most expensive ways to borrow money though so be careful. To help you get your head around short term loans, check out Zmarta. They simplify the terminology, making it so much easier to understand.
Short Term Loan Terminology
Understanding the terminology around short term loans can really help you to get your head around what a short term loan is and how it works.
Payday Loans
One of the two varieties of short term loans, payday loans are designed so you can borrow money in an emergency situation and pay it back after your next payday, in one single repayment.
Installment Loans
Installment loans are the second variety of short term loan. They have the same purpose — to provide cash when an unforeseen cost arises — but are paid back in multiple installments, rather than in one single repayment. This has the disadvantage of being a bit more expensive, but you can spread the cost of repayments.
APR
APR stands for annual percentage rate, which calculates the hypothetical price that borrowing the money would cost you per year as a percentage. Short term loans will have very high APRs because they last so much less time than a year. They will never last longer than six months, but are usually even shorter than this, so the APR isn’t always the best way to gauge how expensive a short term loan actually is. It’s better to look at the overall cost of the loan.
Direct Lender
A direct lender is an organisation or company that lends money to you directly. This is opposed to a broker who is a third party that stands in the middle of you and a direct lender. They work as a middle man, sometimes helping you to find the best deal, for example. A price comparison website is a type of broker. A lot of people choose to borrow from direct lenders to get the best rates, but it can be very valuable to use a price comparison website to help you find the best deal from different lenders.
FCA
The FCA is the Financial Conduct Authority, a regulatory body that’s separate from the government. They regulate the workings of all sorts of financial organisations, including loan lenders, to ensure they are staying within the law and being fair to the people using their service. You should look for FCA authorised and regulated lenders to ensure that you’re borrowing money safely.
Short Term Loan Tips
It’s important to only get a short term loan if you need one. If the payment or expense can wait until after your next payday, or is something that you can save up for, then you shouldn’t get a loan, but carefully manage your budget to accommodate it.
However, if an emergency cost or unforeseen payment arises — like a repair on your car with which you need to get to work or an unexpected bill — then it can be a good idea. You should only go ahead though if you know that you can repay the cost by the repayment date. If you’re uncertain about whether you can afford the repayment, you should seek professional financial advice from a service such as The Money Advice Service.
If you are looking for a short term loan and want more information, then visit cashasap.co.uk. They are a FCA regulated and authorised direct lender in the UK.
Collaborative Post
Leave a Reply