Today, getting a loan from either a private lender or the bank is easier than ever thanks to online applications. Whether you need to borrow money for a large purchase like a car or a holiday or need a small amount of cash to pay for an unexpected expense, you can apply online in minutes to one of the several loan options available and have the money in your account on the same day, or a few days later at the latest.
Short-term loans are a particularly attractive product if you are in need of some extra cash quickly since there are many options to choose from, they are easy to apply for, and there are several repayment options including ‘payday’ loans that are repaid in full on your next payday and installment loans, which can be spread out over a few weeks or months.
However, when you apply for a short-term loan, there are several different factors that must be considered such as the interest rate, hidden charges, pre-payment fees, processing charges, repayment structure and the type of loan.
Loan Purpose:
Anybody considering applying for short-term finance should understand the purpose of these loans. Payday loans and short-term installment loans are designed to be used for one-off financial emergencies and unexpected expenses, rather than all the time. Borrowers should avoid seeing these loans as a form of ongoing or regular credit like an overdraft or a credit card. This is because short-term loans tend to have high-interest rates and defaulting on the loan will make it far more expensive than you intended it to be when you applied.
The Amount of Money You Need:
If you’re considering getting a short-term loan, the first step is to calculate how much money you really need. It can be tempting to accept the higher offer from the lender if you are eligible to borrow more, but consider the fact that this only means that you’ll end up paying back more money than you would if you only borrowed the amount that you need. Limited-time loans are an expensive form of credit, which is why it’s so important to only borrow what you really need. Any extra that you take out is only going to result in you paying more interest to the lender. If you find that you need extra money afterwards, some lenders allow you to top your loan up once you have paid off at least half of it.
Repayment Affordability:
Once you have an idea of how much money you want to borrow, it’s important to understand how much you can comfortably afford to repay each month. Once you have a figure in mind, it will be easier for you to make an informed decision regarding how many months you will need to repay the loan over. New Horizons offers the option to repay your short term loan over three to thirty-six months, offering plenty of flexibility to borrowers who might need more time to repay in full. You can also use the tool on their website to determine how much your monthly repayments will be for short term loans of varying amounts, to help you decide on the right loan term for you. A longer repayment term will mean more interest, but it’s always better to opt for a number of months that you can comfortably afford, rather than being left short trying to pay off a loan in the shortest amount of time possible. Explore the various short term options from New Horizons here. It’s a secure UK site with a high feefo rating. You can borrow up to £5k and have the cash within 15 minutes.
Your Credit Rating:
Before you borrow via a short-term loan, it’s important to understand where you currently stand in terms of your credit rating. This can help you determine whether or not you are likely to get accepted when you apply and can help you decide on the right type of loan for you, such as a bad credit loan. Before you apply, you might find it useful to use a credit checking website that allows you to go over your credit report and look for any errors that might be causing your credit rating to be lower than it needs to be. Having any errors that you find removed can improve your credit score and make it easier for you to get accepted for a short-term loan.
Fees and Charges:
In addition to understanding the rate of interest that you will be paying when repaying your short-term loan, it’s important to make sure that you read the terms and conditions of the loan agreement and ensure that you are informed of any additional fees and charges before you apply. For example, some lenders might charge you a fee if you are late with or miss a payment. Others might charge a fee if you decide to repay the loan in full earlier than the agreed repayment time, while many will allow you to do this for free. Reading the terms and conditions will ensure that you are thoroughly informed regarding any additional fees and charges that you might need to pay, to help you avoid any nasty surprises further down the line.
Regulation:
You should also make sure that you borrow any money from a regulated credit provider. In 2016, the Financial Conduct Authority (FCA) made short-term and bad credit loan providers go through a series of rigorous and strict tests in order to keep their lending licenses. Lenders have a code of conduct that they must follow in order to remain compliant with the FCA, including not charging interest at any more than 0.8% per day, charging no more than £15 for default and penalty fees, and that the interest and default charges cannot add up to more than the amount that you borrowed. Any company that is not registered with the FCA is operating illegally, so make sure that you always borrow from a regulated credit provider.
Understanding the Risks:
Finally, it’s important to have a clear idea of all the risks when you decide to borrow a short-term loan. Any kind of borrowing will always carry some risk, but short-term loans can be more susceptible due to their high-interest rates and short repayment terms. Lenders who provide short-term loans tend to be much less concerned about temporary past financial difficulties compared to banks and bigger lenders, which is why they tend to have higher acceptance rates.
However, it’s important to understand that if you cannot make your repayments on time, the lender can charge you a penalty fee of up to £15 and default on the loan can seriously damage your credit score. This is why it’s so important to make sure that you are responsible when applying for a short-term loan and have a clear idea of how much you need to borrow and how much you can comfortably afford to repay each month before you accept the offer. If you experience any financial difficulties while still repaying the loan, it’s important to contact the lender as soon as possible and alert them to your situation; many have strategies in place to help borrowers who are struggling to pay and this can help you avoid any penalty fees and charges.
Short-term loans can be an ideal financial product to apply for if you need quick cash, but be sure to consider these important factors before you start.
