Short term loans can provide people with a bad credit rating with a financial helping hand if money is short and you need to get hold of cash as soon as possible. So what do short term loans bad credit entail and what should you consider? Read on if you want to learn more about these types of loans, along with what they entail.
Two Types of Loans for Short Term Borrowing
When thinking about loans that are taken out over the short term there are two main types:
- The short term loan;
- The payday loan.
Both loans allow you to borrow up to a certain amount of money and pay back the loan over a specified period. Both types of loans are popular among people with poor credit ratings as they are easier to find approval for than personal loans.
Short Term Loans Are Extremely Popular
Short term loans and payday loans are extremely popular in the UK with the Financial Conduct Authority revealing that £1.2 billion in loans had been taken out during 2018.
The top places in the UK for short term borrowing during 2018 and the total value of loans are:
- Birmingham – £37, 128,942;
- Manchester – £28,128,942;
- Sheffield – £23,768,022;
- Glasgow – £23, 641,636;
- Newcastle – £23,453, 937.
As you can see, if you are looking for a short term loan in the UK you are among the many millions of others doing likewise.
Why Short Term Loans Bad Credit Are So Popular?
Short term loans are popular with people who have a poor credit rating due to the fact that the amount of money requested is small on the overall scale of borrowing.
They Are Usually Easier To Find Approval For With Bad Credit
Loans taken out over the short term are generally not for more than £1,000 and they are repaid back quickly, usually no longer than one year. This means that lenders are not taking as big a risk as they would be if you wanted to borrow thousands of pounds spread out over numerous years.
May Help To Prove You Are Reliable
Short term loans are even one way of improving your credit rating. This works as you borrow a short sum of money and pay it off as agreed. The lender sees that you are reliable and are more likely to offer you a loan again at some point in the future if you need it. The loan is cleared and providing you paid on time has a positive effect on your credit rating.
Fast Application and Instant Decision
Another reason short term loans are popular is the fact that they can be applied for online very quickly and there is an instant decision. Loans such as these do not generally require you to fill in any paperwork so you do not have to wait several days for the paperwork to come through the post for you to have to read, sign and send back. In fact, most short term loans come with an instant decision and money may be paid the same day into your bank account.
Help You to Overcome Unexpected Financial Difficulties
Short term loans bad credit can be a great way of overcoming unexpected financial difficulties such as if you need to get hold of money quickly to pay off a large final demand bill or repairs to a household appliance you cannot manage without or repairs to your car.
How Does The Short Term Loan Work?
A short term loan works by applying online and giving your details, including:
- Your age, at least 18;
- Your address in the UK;
- Your income and outgoings which are used to work out if the loan is affordable;
- Your bank account details which are used to pay the funds of the loan into if approved;
- Your debit card number so the lender can take back the loan repayments.
When you have given us this information, we can check with our panel of lenders to attempt to match you with a lender willing to offer you a loan.
What Is The Difference Between the Short Term Loan and Payday Loan?
The difference between the two loans is the sum of money offered and the amount of time you have to repay the loan. With loans took over the short term, the sum of money generally falls between £100 and £1,000 but some lenders may offer more and some less depending on your personal circumstances.
A Payday Loan
Lenders offering payday loans will generally offer between £100 and £500 but this may vary between lenders and your circumstances.
This type of loan can be used for any reason, with most payday loans being taken out to cover emergencies where you need cash and you do not have it until your next payday.
Some of the many reasons you might want to apply for a payday loan are:
- Paying off a bill that cannot wait until payday;
- Paying for emergency repairs to the home;
- Paying for repairs to your vehicle;
- Repairs to household appliances;
- Getting out of an unauthorised overdraft.
The payday loan can be paid back on your next payday or you can spread the cost of the loan out for up to three paydays. Interest is generally calculated on a daily basis. While the exact amount might differ between lenders, the FCA ruled that no more than 0.8% interest could be added onto the loan per day.
Therefore, if you were borrowing £100 for one month the loan would accumulate £24 in interest and the amount repayable with interest would be £124. Of course, this is per month so if you spread the payday loan out over three paydays you would pay more in interest.
As the amount of money borrowed is so small, lenders offering payday loans will not focus too deeply on your credit rating. This is one reason why payday loans are popular among people with poor credit ratings.
A Short Term Loan
An actual short term loan generally offers borrowers the chance to borrow more than what the payday loan offers, although this will depend on your circumstances and ability to repay the loan.
With this loan, lenders may allow you to borrow up £5,000. The typical range with a short term loan is between £500 and £1,000. This would depend on the lender with some offering more or less. Again, the amount you might be able to borrow would depend on your circumstances, and whether the lender thinks the loan is affordable to you.
Short term loans can be spread out for up to 12 months, which can make the loan an affordable option. Some lenders may offer you the chance to spread the repayments over slightly longer. Usually the longer you spread the loan over the smaller the monthly repayments are but the more interest will be added.
The interest rate will differ from lender to lender so it can pay to compare the interest rate and go for the lowest offered. If you have a poor credit rating, the interest will not be as low as if you have a good credit rating.
One factor to consider with short term loans is whether the lender stipulates an early repayment fee.
If you suddenly find you can pay off the loan, for instance, if you have an unexpected windfall, you might be able to benefit by doing so as you could save money on interest. However, if the lender states that you have to pay an early repayment fee, any savings may be lost. Check this out at the time of signing up for the loan so you do not get any nasty surprises.
Benefits of Applying For a Short Term Loan with Us
There are different ways to apply for loans and one of the most popular is online. You can either make a search by yourself using a search engine to try to find a lender who is willing to offer you a loan if you have bad credit or allow us to search with a panel of lenders. The benefits to us matching you with a lender are:
- You only have to make one application to be able to search with multiple lenders;
- The lenders we work with offer competitive rates;
- Lenders offer numerous loan options so you are more likely to find a suitable loan for your needs;
- Lenders offer affordable loans;
- Application is quick and easy;
- Instant decision;
- If approved money could be paid into your bank within hours;
- The lenders we work offer loans from £100 to £5,000 repaid over one to 36 months.
If you are trying to find a loan with bad credit history, short term loans may be the most suitable option for you. There are loans available from one to 12 months. Lenders we work with take into account your ability to be able to repay the loan but they will also look briefly into your credit history. If a lender thinks you can repay and you meet all the criteria set out for borrowing, there is no reason why you should not be offered a loan.
Applying for short term loans bad credit is fast and lenders give an instant decision. We bridge the gap between you and a panel of lenders, all of whom offer competitive rates and numerous loan options.