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A short term loan or a payday loan can come to your rescue in an emergency. Both of these options allow you to borrow immediate money and pay it back quickly in a year or less. There are some distinct differences between short term loans and payday loans that you should consider, before choosing which one is right for your situation.
Let’s start with defining what a short term loan is.
Short term loans, put simply, are personal loans that you pay back in a short amount of time, typically in a 2-12 month range. This differs from a long term loan, that is generally available for a loan term of 2-3 years, with a relatively low-interest rate.
Short term loans offer a smaller loan amount usually between £250-£1500 that often comes with a high-interest rate. You might be able to get up to £5000 with a short-term loan. The longer the term of the loan, the more interest you will pay.
A payday loan is similar to a short term loan, which is a small loan that is paid in a short period of time. The difference is that a payday loan is meant to be paid on your next payday. Traditional repayment terms last for 2 weeks up to 2 months.
The interest rate is typically a bit higher as well, but due to the length of the repayment terms, it can come out being cheaper than a short term loan overall.
Yes, you can. Short term and payday loan lenders are very accepting of people with many different credit backgrounds.
You can often get accepted even if you have a low credit score. This is because lenders look closely at your ability to afford the loan, rather than your creditworthiness.
The application process for a short term loan or payday loan is simple, and many can be applied for online. The requirements for the application are as follows:
As stated before, many short term loans have online applications. If approved, you can get your funds in as little as an hour or two.
Be aware that your employment status may need to be verified. This might mean calling your employer, or through a third party company prior to your application being approved.
There are a number of things you need to look at when looking for a quick loan. How much you need, how much you can afford to pay, and how much you want to pay are all the things you need to consider when choosing the type of loan you’ll need.
When it comes to short term loans, keep in mind that the shorter the repayment terms, the lower the cost of the loan will be.
The tradeoff, however, is that the payment amounts will be significantly higher than if you had a longer-term loan.
If you are needing a quick loan, and have the capacity to pay it in full in as little as 2 months or less, a payday loan might be your best option in order to save money.
If you aren’t able to make a large lump sum payment in that short of a time, a short term loan with a longer repayment period may be a better fit.
It is important to note that in recent years the terms payday loan and short term loan have become somewhat interchangeable. This is to reflect that not all payday loans follow the traditional 30 day repayment period anymore. You can pay some of them back over several months.
You will often see the two terms used in the same article or on the same website to refer to the same type of loan. To keep things simple, remember that all payday loans are short term loans but not all short term loans are payday loans.
Keep this in mind and always check the fine print as you decide which short term or payday loan is best for you.
By law, a short term lender cannot charge you interest or fees that surpass the amount of your original loan. So you will never pay more than £200 for a £100 loan. If you go to a lender that is bypassing this law, turn the other way.
Another thing to consider is that your interest rate and repayment terms will vary depending on your creditworthiness. You can be approved for a short term loan with bad credit. But you will end up paying more interest. And you may not have access to some of the loan amount or terms that may be available to those with high credit scores.
Lastly, you should use short term loans for emergencies and as a last resort only. If you find yourself taking out back to back short term loans, or using them for frivolous purchases, you should seek help from a financial professional. They'll help you get your finances back on track.
Short term loans and payday loans can be a great and easy way to get quick cash in emergencies. This can mean car trouble, medical bills, or sudden death in the family.
And the best part is, they are available to people with good, bad or ugly credit.
With many options available to you, it is easy to find something that will work within your budget.