For most people in the UK, the biggest borrowing they will ever make is a mortgage, which is usually a 25-year deal or longer. This is closely followed by car finance, which also tends to be over several years, although nowhere near as long as mortgages. Businesspeople can borrow huge amounts and often they are long-term loans too, but not everyone wants borrowing that seems to last forever.
There are more occasions where people need to borrow an amount of money for just a few weeks and it is for this purpose that short-term loans have been put in place. You could find yourself facing a financial emergency and need cash quickly. Short-term loan deals are perfect for this, and here are just a few tips on why this could work for you.
Payday Loans and Interest Rates
Payday loans, as they are often called, work on the basis of an online application, quick acceptance, and funds in your bank shortly afterwards. There is no protracted application process or waiting weeks for the funds to appear, as that would defeat the object of them. For a long time, the biggest two payday lenders were QuickQuid, who have ceased to trade, and Wonga.
The interest rates Wonga used to charge were very high, but in recent times they have had to reduce them to a more acceptable level. The only problem with using a company like this is that they are a direct lender. This means they provide the loan and you repay them directly.
However, some companies, as well as being direct lenders are brokers as well, which means they can find the best deal for you. If you are looking for a Wonga loan alternative, it is one of these companies you should be looking at.
Helping Your Credit Score
Generally, a short-term loan has to be repaid in one to twelve months, depending on the term agreed at the start of the loan. If you have such a loan and make every payment as and when it is due, this can help to improve your credit rating. Some people have a poor credit score because they have not had credit in the past. Lenders view this as a bad thing as they are uncertain whether you will be responsible enough with making your monthly payments.
A short-term loan that is kept in order can make a huge difference to your credit score. If you are suffering from not being able to get finance for anything because of a poor credit rating, a short-term loan can be a perfect way to help increase the score you are awarded.
Whoever you have a short-term loan from, they will be regulated by the FCA. This means that interest rates and late payment charges are capped, ensuring that your borrowing cannot get out of control. This is great news for anyone facing a financial emergency that needs a short-term loan, as they will have the peace of mind of knowing that they will only pay what they are quoted at the outset, and this makes short-term loans a much more attractive option.
Have you tried short-term loans? Let us know below.