Short Term Loan

Sometimes extra expenses pop up and before we know it, we’re in need of a short term loan. You’re not alone if you’re in this situation, with 40 million people within the UK requiring a short term loan at least once a year and with 3 in 4 of them applying for more than one loan a year – it can be a difficult situation.

What makes the process of looking for a short term loan even more difficult is that banks and lenders are more likely to hand out long-term loans due to the increased returns they provide. When in search of short term loans, you’ll often be met with a larger interest rate.

Here are a few guidelines on how to secure the perfect short term loan for your financial needs while providing the lowest interest rates.

What are short term loans?

Short term loans are loans that are offered for usually less than a year. Term can vary from 1 month up to 12 months. Since the term is short, the amount available will be smaller, than for long term loans. Most often you can submit an application from £100 up to £5,000. Short term loans are offered by banks, credit unions, and various lenders, many online.

Things to Keep in Mind When Looking for a Short Term Loan

Take time to decide how much money you will need to borrow. The more precise this number, the better. It’s no use to secure a short term loan under the amount you need as taking out two short term loans can have an adverse effect on your credit score. Securing too much money means you will pay more in interest which can eventually lead you to need more loans.

The amount of money allotted to you isn’t always up to you. But you can ensure that it’s within a reasonable range by asserting your needs and doing your research.

Here are a few more things to keep in mind before submitting a short term loan application and signing on the dotted line:

• Once you’ve assessed what you need and what you can afford and laid down a stable foundation from which to start your loan application process, you’re now left with the task of deciding exactly which type of short terms loan suits your needs best.
• Try online resources to understand the different types of loans. You could start with our Loanza guides, that you can find under the Sitemap link in the footer. You can easily continue to the loans application from this guide as well. Generally speaking, you are more likely to be accepted for a loan through online applications.
• Prove you are capable of paying your short term loan back – share information of employment records, income, and expenditure - these will be asked in our easy-to-fill, short application form.
• Check your credit report – checking for any suspicious spending records allows you to open inquiries on various purchases that you’re wary about. Also, if there are any errors there, you could spot them, correct them, and improve your score.
• Research multiple lenders before making a final decision. Be sure to check they are authorised and regulated by the financial conduct authority. Legitimate lenders need the fca's approval.
• Don’t apply for multiple short term loans or credit cards at once (will have a negative effect on your credit score.)
• Consider using a short term loans broker like Loanza, to take the research and guesswork out of the process for you.

Credit Union

Credit Unions tend to offer short term loans to those struggling with lower credit scores. You’ll also find that they offer a relatively low-interest rate but are still stringent on payment times.

Consider applying to your local credit union for a short term loan if you think your credit score is still of sufficient value and you’re sure you’ll be able to meet the set payment dates.

Take Out a Guarantor Loan

If there is someone in your life of ‘creditworthiness’ status who is willing to co-sign your loan application, this may be your best option to getting accepted. This is called a guaranteed or guarantor loan.

The majority of banks will take this co-sign into account as proof that they will be reimbursed in whole. They will be more likely to accept your application. Since someone with a good credit history is giving the lender a guarantee, that in case you default on your loan, they will pay what's owed to them, the interest rate will also be better on these types of loans.

Government-Backed Loans

This is a short term loan subsidized by the government. It's aimed primarily at making homeownership more affordable for those with poor credit scores.

The recommended method of securing a government loan varies from area to area. In the UK, the Enterprise Finance Scheme is a government-guaranteed lending scheme for small businesses.

Secured Personal Loans

This is one of the most common forms of short term loans. You’ll find the majority of reasons behind taking out these loans to be down to mortgage or car payments.

You can secure one of these loans short term by offering up an asset of yours. This will function as collateral if you are not able to eventually pay the loan back in full. This type of loan is best for those who have fallen upon particularly unfortunate credit circumstances but still have valuable assets. However, it is risky, because if you are at risk of late repayment, your home or other assets (such as your car), can be repossessed.

Unsecured Personal Loans

Unsecured personal loans are an option if you do not possess any assets that will be accepted as sufficient collateral or you just don't want to risk losing it. Lenders are less likely to accept this type of short term loan if bad credit is a factor due to there being no security on their part. However, increasingly, lenders are considering affordability instead of credit score for a loans application.

Second-Chance Instalment Loans

These are rather large loans but still considered to be small scale. They range from £500-£5,000. This makes them appealing to those who do not wish to undertake the commitment and financial burden of a long-term loan but also wish to have the relaxed credit checks that come with short term.loans.

It can also be a chance for consumers to right their credit scores. Undertaking a second-chance loan and following all of the requirements until it's fully paid can drastically improve any credit score.

Bad Credit Loans

You should only consider this type of short term loans if you know your credit score is poor or very poor. Offering a wide range of rates, bad credit short term loans can be the perfect opportunity for one to get their business off the ground or make a significant purchase such as a car. But bear in mind, these loans, just like any other, in case of late repayment could cause you serious money problems. Only make an application if you really need to.

Your financial trustworthiness will still be under scrutiny when applying for this type of short term loans. You can apply online for bad credit loans, which will save you some time if you need cash quickly.

Check these when applying for short term loans

With any kind of loan application, including loan short term, you need to make sure your lender or broker is legitimate and reputable. They have to be authorised and regulated by the financial conduct authority fca. To be absolutely sure, you can search the lender or broker's trading name on the financial conduct authority website. The address of the registered office should be displayed in the footer of direct lenders and brokers as well. Scotland, England and Wales company number should be safe, since you need funds in the UK.

Be sure that you fully understand your loan terms. Check the interest rate, the total amount payable, the monthly repayments. See if the representative example is reasonable. Understand what happens in case of late repayment. Avoid getting into further money problems.