When you are looking to borrow money through short term loans, you may think it’s an easy solution, an obvious choice to get money quickly. There are alternatives, which you may want to consider, which may be a better solution for you in the long run.
Short term loans are small sums of money used for emergencies, such as a car break down, for example. You need to make a quick decision to get back on the road. When you spend a little time doing a bit of research, you will find a number of options based on your credit score. Having a small amount of funding can go a long way, but exploring your options is always worthwhile before you decide on a short term loan.
It’s important to bear in mind that short term loans are often only up to £500 and you repay them within six months, sometimes sooner. You choose between a fixed or variable interest rate and they come with a high APR. If you have a poor credit rating, you can be considered for one of these loans. This type of loan comes with a very high interest rate and is a good choice for those with a poor credit history, but they can result in financial difficulty if you find you are unable to pay on time or miss a payment.
All types of loans or borrowing can result in financial issues and leave you struggling to repay. Short term loans with high interest, that in the event of extending the loan term, due to failed or missed payments, you will find they have a negative knock on effect.
Applying for Short Term Loans
If you think that a short term loan is the right choice for you, then you will want to check your credit score and eligibility, based on the lenders requirements. Take the time to browse the options available from numerous lenders and consider any alternatives. Be sure you can afford the repayments without getting yourself deeper into debt.
Due to the fact that a short term loans is a solution for urgent cash when you need it the most, it is a very tempting offer. They are usually easy to apply for and you can have the money in your bank account within hours, depending on the lender. It is very important to consider any alternatives to short term loans before signing on the dotted line.
There are a number of alternatives to a short term loan, which you will want to take into account.
if you have a current account, an overdraft option may be the simplest option. There is usually a small fee payable when you use an overdraft facility, but it is very small when compared to what you will pay on a short term loan. In the event you do not have a current account that offers the opportunity of an overdraft, you may want to change your accounts to one that does.
There are a number of credit card options for those with a good credit rating. One is a 0% credit card, which enables you to pay for something and spread the cost over a 0% period without having to pay any interest. This is a much cheaper option than a short term loan, as long as you are able to repay the amount within the 0% time frame.
Credit Builder Cards
In the event you haven’t been successful in holding a good credit rating up to now, you may be able to secure a credit builder card. While you may not be able to borrow the amount you need, as long as you can make the monthly repayments, you will find that you have access to money as you need it while building your credit rating.
Guarantor loans are the perfect choice if you want to borrow the amount for a longer period. This lets you borrow against the good credit rating of a family member or close friend, who is willing to take responsibility should you miss any payments. This enables you to access a lower interest rate and spreading the cost over a long period, can make the repayments more affordable than a short term loan.
Charity Organizations and Non Profits
Some charities and non profits will provide financial assistance when you need it the most. They can also assist with resources to help you get back on track, which includes mentoring, training, workshops and more. They provide a no strings attached approach, where you don’t have to pay back the money. You will need to prove you quality based on their eligibility criteria. These programmes are usually reserved for the elderly, unemployed and those with disabilities or terminal illnesses.
Reduce Interest Rates
If you find that you are paying high interest on your mortgage or other loans, it may be worthwhile seeing if you can reduce your interest rate, giving you more cash in the bank for the unexpected expenses you now face. This is not always guaranteed and not all lenders provide this option. It is best suited if you have a good history of making on time payments on your credit card or loan amount.
This can help you lower your expenses, making it easier to take out a short term loan and make timely repayments for the agreed period of time.
Ask for An Advance on Your Salary
While you don’t want to share your financial burden with your employer, it may be an option to speak to your employer and see if you can get an advance for this month. Some employers are happy to advance you a small portion of your salary so you can get the cash you need. This is useful when you have car problems and are struggling to get to the office, as a result.
It’s important to remember that while an advance is useful at the time, it does have its downsides. You will be paid less at the end of the month, which can cause a vicious cycle, as you may find you are unable to make payments on some of your other debt. This may be the best option if you are employed and need the money in a hurry, as your employer can often do the transfer to your account the same day.
Taking out a personal loan comes with advantages, as they are versatile and you can secure the money you need and more. They are usually unsecured, which means you don’t have to put your home or car up as collateral. Personal loans are offered by your bank or an online lender and is usually offered to those with good credit, though there are personal loans for those with bad credit.
Personal loans are more affordable than short term loans as they are taken over a longer period, giving you more time to make repayments. They are suitable if you have a stable income and a good credit rating. It can take slightly longer for approval and for the money to come into your account, which is something to take into consideration.
Is a Short Term Loan Right For You?
Short term loans are emergency loans and the lender provides you with the money you need, as long as you repay it within the short time frame agreed on at the time of signing the loan agreement. While they provide fast cash, they can cost a lot of money in the long run with high APR’s and interest rates. This type of loan should only be considered as a last resort.