If you’re a newbie to applying for a short-term loan, it could be irresistible enough to avail for when you need cash. A short-term loan means you have to apply for a loan, obtain the desired funds, and repay them within a short span of time.
Such loans are known to be a real lifesaver when borrowed together with emergency funds for unexpected medical bills or car repairs without applying for a loan traditionally from a bank. But the short-term loans come with various risks, such as higher interest rates, fees, potentially unethical lenders, and brief reimbursement periods. Hence, you must approach these loans with significant circumspection.
Are you thinking of how to get a short-term loan in the UK and all the nitty-gritty factors of such loans? Let’s dive right in.
What Are the Types of Short-Term Loans?
- Car title loans
This short-term lending lets the borrower use their cars as collateral as long as they’re owned directly. Such loans mainly let you borrow approximately 25–50% of the car’s market price and can come with APRs of 300% and reimbursement windows as short as 15–30 days. If you’re behind on repayments, the interest charges will increase, and so will the fees.
- Payday loans
The most common type of short-term loan is a payday loan, which gives borrowers money while they wait for their next paycheck. Such loans often need quick payback, for example, as soon as you get your paycheck. Also, it might come with substantial fees and APRs.
- Bank overdrafts
This means that customers get provisional coverage from their bank at a significantly higher interest rate when their accounts don’t have the required funds. Hence, this forms a short-term loan. This is one type of installment loan where borrowers make daily and periodic payments until the principal and interest have been compensated.
- Fixed-rate loan
It’s one where the interest rate stays the same for the loan’s entire span. The best example of a fixed-rate loan is a mortgage. But student loans and auto loans are also part of such fixed interest rates.
- Merchant cash advances
It’s a specific type of loan that’s used by businesses. Here, the lenders provide the companies with a hefty amount of cash, and that business compensates for the loan with a specific percentage of their future credit card sales.
Who Is Eligible to Get a Short-Term Loan?
You have understood the type of short-term loans provided by various financial organizations. Experts at UKBadCreditLoans can help you connect with the most suitable lender as per your eligibility, profitability, and preference.
You may wonder if you are eligible for one! In order to qualify for a short-term loan, you will need a real source of income, such as disability benefits or social security.
You will have a bank account; hence, the lender can deposit the cash quickly and you can pay your bills. However, in the UK, the rules for being eligible for a short-term loan are the following:
- Must be a UK resident and be 18+.
- Must have a steady flow of income.
- Must have a bank account.
If you fulfill all these requirements, you will qualify for a short-term loan.
What Are the Steps for Obtaining the Best Short-Term Loan?
- Check the total cost.
When considering borrowing charges, you should never check the interest rate only. You must be aware of whether there are any fees or additional fees involved. Initially, look for the quoted interest rate in the APR as it will demonstrate the interest amount you will disburse on your borrowing.
- Be transparent if you’re signing up for a secured or unsecured short-term loan.
A secured loan is nothing but a loan secured by the value of your property. It’s intended as a long-term obligation instead of quick access to short-term money.
On the other hand, an unsecured loan is for a year or more and is fixed at a particular interest rate. It’s not associated with or tied to any assets you own. However, the charge you’re quoted will be levied on your creditworthiness.
Such loans are comparatively riskier for lenders, as when you fail to reimburse the money, they don’t have the security of being capable of claiming your property. Hence, these are more lavish than secured loans, such as mortgages, and the total amount you can borrow is comparatively lower.
Conclusion
Well, that’s all! You are likely to apply for a short-term loan and get a loan for less than 30 years. However, the validity of such loans is usually 2 weeks to 3 months, varying with the lenders.