How do Short-term Loans Work?

How do Short-term Loans Work?

Short-term loans are relatively new and they are loans that many people have not used. This means that you may not be aware of how they work. You might think that there is no point in you really knowing, but actually it is wise to know about all types of loans. This is because you could find yourself in the position where you need to borrow money and it is important to understand what options you might have and which would be likely to suit you the best. There is nothing worse than suddenly needing money, being in a panic and picking a completely unsuitable loan. It could cost you more money and stress and you could end up really struggling to repay it. But, if you know about different loans and how they work, you should be able to make a much better decision and hopefully pick a loan that will give you good value for money and that you will be easily able to repay.

So how do short-term loans work? They are similar to any other loan in that you borrow money, get charged interest and fees for that privilege and then you have to repay it again. However, there are some key features that they have, which are different to a majority of other loans. This is what is important to find out about and then you can compare them and know whether they will be the right loans for you.

  • Credit check – many people get turned down for conventional loans because their credit rating is not good enough. We all have a credit report and this has information about us which potential lenders use to judge us. They all have different criteria, which makes it hard to know exactly how a perfect credit report should look. However, the types of things that they are likely to be interested in would be previous borrowing history, ability to make regular payments and employment status. If you have had loans in the past and repaid them on time, got a job with a good salary that is paid regularly and always pay you rent/mortgage and bills on time then you would seem a great candidate. However, If you are self-employed, have missed lots of loan payments in the past and got a CCJ and sometimes miss utility bill payments then you will not look so good. Someone like this is likely to be turned down for a loan by a long-term lender. However, a short-term lender will not judge based on this. Therefore, even if you have a bad credit report, you should still be able to get a loan from them.
  • Speed– the amount of time that it takes to get the money, when you apply for a loan can be crucial for some people. If you need money quickly, perhaps because you have an emergency and need to buy a new fridge, get your roof repaired before it leaks or buy food to feed your children, then it can make a huge difference if the loan is fast. A more conventional loan can sometimes be long-winded in getting you the money that you need. Short-term loans are quick. This is because many of them were set up with the purpose of being available for emergencies. This means that they are fully aware that money could be need really fast. This means that it can be possible to get the money within a few hours, form some lenders.
  • Repayment – repayments for loans can be different too. A payday loan is a specific type of short-term loan and it has to be repaid in one lump sum. Other types of short-term loans are repaid in instalments but not many. This means that these loans are repaid much more quickly than a long-term loan. Some people much prefer this as it means that they are not in debt for so long. However, it can mean that you may have come up with more money in a shorter space of time, so you will need to be sure that you will be able to do this. Otherwise you may need to consider a different type of loan.

So, as you can see there are some quite significant differences between short-term loans and long-term loans. It is wise to stay aware of what these differences are and then you can make sure that you are choosing the best sort of loan to suit you. There are many types of short-term loans as well, which means that you will need to know about these as well. Then if you do think a short-term loan will be the best type for you, you will know what types you have to choose from. You will also need to then pick between lenders to find the precise loan that you feel will be the best.

Will Instalment Loans Suit me?

Will Instalment Loans Suit me?

Sometimes we can find it difficult to know whether a particular loan will suit us or not. It is wise to find out though, because then you will be sure that you are using the best loan for you. If you do not know about them all you will not be able to make a fully informed decision.

What am I Looking for in a Loan?

It is a good idea to start by thinking about what you are looking for in a loan. We will have not different needs at different times. This is because we may have an urgent need for the money or we may not, the amount we need will differ, the use will differ, our credit rating will differ and things like this. At one point we might need a mortgage to buy a home for £249,000 but then a few years later we might use a personal loan to buy a car for £10,000 and we may also use a credit card to buy food. We will be using different loans for different things.

Therefore, each time that you plan on borrowing money, you need to think about your specific requirements. We would always tend to do this quite quickly, but it can be good to write it all down. It is sensible to get together a detailed list, not only about the type of loan but also about what you might be looking for in a lender as well. Then you will be able to have a very clear idea of what you are looking for.

What Loans are Available?

Then you need to be aware of what loans are available. There are lots of different types of loans and they all address different needs. It is really important to have a good basic understanding of what there is available and who they might be for. Then you will begin to see which might suit you the best in the situation that you are in.

There are quite a few different types of loans and some may provide a similar service, perhaps lending similar amounts of money or having a similar amount of repayments. It is important to understand what the main differences are between the different types. This will allow you to know whether that particular loan is suitable for your needs or not. It is worth understanding these differences so that you do not make the wrong choice of loan.

It can be easy to jump into a decision without knowing what is actually available. If you have a good understanding of the loans that are available, it will be much easier for you to know which will be the best for you when you are picking one.

Which Suits me the Best?

It is important to remember that within each loan types there will be differences. For example, with a mortgage you may decide on a fixed or variable rate, you might get an interest only or a repayment and then once you have chosen this you will have a lot of different lenders who will all differ slightly. Therefore, you will need to look at lots of them to see which will be the best for you.

If you are looking at an instalment loan, then you will need to compare it to other similar loans to see whether it really will be the best one for you. Compare the different features of the different loans and compare them with the list that you have made which states what you want. Then you will be able look at the loans and see if they fit in with that or not.  You will be able to think about whether this loan will be better for you.

With an instalment loan, you will find that some of the main differences between lenders will be how much you can borrow and how much you are expected to repay each month. You will also find that some are more well-known than others, some will have better reputations and some better customer service. You will therefore be wise to find out a bit about them all so that you can be sure that you are choosing one that will suit you.

It will take some time to do all of this but you should find that it will be worth it. You will end up with the loan type that best matches your requirements and hopefully the best lender that offers the loan. This is important because it will mean that you are more likely to get a better borrowing experience. You will hopefully feel that you have got good value for money because you have chosen a loan which is not too expensive and that you are confident that you will be able to repay with ease, that will offer you a service that you like.