There are many news stories about borrowing, and the debate about short term loans has dominated the press over recent years. But what do you actually know about short term loans? Who can apply, and what are the benefits? We’ve explored these points in more detail below:
Use a Short Term Loan Responsibly
This type of borrowing is ideal if you have a poor credit history and need access to funds. Also known as a “bad credit loan“, these loans can be taken out quickly and repaid flexibly within days or months. Banks have tightened up their lending criteria. So many people can only turn to a short-term lender when they need financial help.
New conditions introduced by the Financial Conduct Authority (FCA) mean that you will have to be able to prove that you can repay a loan. You’d do this by presenting an example of your income and expenditure to the loan company. You must also be able to demonstrate that you are in employment.
These rules were introduced to stop reckless borrowing and to ensure that the rising levels of personal debt in the UK don’t climb any higher. According to The Money Charity, the average household debt in the UK is £62,670.
Only Borrow If You Have To
Unexpected expenses occur often throughout life. A new pair of shoes for your child, a broken window at home or even emergency car repairs all cost money. If you don’t have the cash to hand, or your credit card is maxed out, then a short-term loan is often the only solution. Just ensure that you don’t take out a loan for a frivolous reason, that you later regret.
My Financial Broker can help you find a short term lender when you need to borrow money. In general, short term loan repayments are flexible and simple, and you can repay early without charge. You can also choose from a range of repayment options to suit you.
The Benefits of a Short Term Loan
Poor credit ratings are a plague for many people. Things like temporary work contracts and the rise of living costs have had a massive impact on how people live. Not to mention how they pay for the basic requirements of life.
A poor credit rating means that many high street lenders will not offer loans or overdrafts to those who have lack of credit history or people with a poor credit score. Companies that offer payday loans will generally look at fewer factors when assessing an application. They will concentrate more on the income of the applicant and their ability to pay it back within a reasonable time, rather than their current assets and credit history. However most short term loan companies will not accept you if you have had a CCJ in the last 12 months, have been declared bankrupt, have no bank account or are on a debt management programme.
Missing even one payment can be detrimental to your credit score in the long and short term, so payday loans have become increasingly popular to cover monthly costs. They are a great way for people to cover everyday expenses that occur earlier in the month before the pay check comes in. It’s a way of spreading the monthly costs of living without reengaging on the bills. Therefore payday and short term loans can be a great option for individuals with a poor credit history, the interest is usually higher but the terms offer more flexibility.