A short term loan can offer a lifeline of cash when you need it. It offers quick access to money that can get you out of a financial tight spot when the need arises.
Short-term borrowing is becoming an increasingly popular way to access cash fast. As with any loan, you should always take the time to understand whether a short term loan is a good fit for your needs. Regardless of how quickly you need funds, it’s imperative that you pause, take a moment, and read about the risks associated with short-term borrowing.
With over 5.4 million loans being made in the year to 30 June 2018, and the cost of borrowing remaining stable and lower than before the price cap, the short-term lending industry shows no signs of slowing down. According to the Consumer Finance Association, 56% of consumers who took out a loan since 2015 state that a short-term loan is an affordable way of borrowing.
The big question is, is it affordable for YOU?
A short-term loan is a financial product that is paid back over, you guessed it, a short period of time, from a week up to 12 months - unlike traditional personal loans which can be paid back over multiple years, such as a mortgage or car finance, for example.
A short-term loan, as the name suggests, is not a long-term financial solution. They are designed to offer quick cash as a stop-gap, whether it’s to tide you over until payday or help you pay for emergency expenses (repairs, bills, etc.).
A short term loan is much like any other loan. You choose the amount you need, the lender assesses whether you can afford the repayments, you receive the money, and you start repaying the amount back in small instalments over a few months or more.
We have created an easy-to-use short-term loan calculator to help you calculate the cost of the loan.
Before applying, you need to make sure you meet the lender's criteria which can be found on their website. Applications are made online and can include information such as personal details, income and expenditures.
The lender will check and verify your application to make sure the details are correct and that you can afford to pay back the loan. They will also perform a credit check. This decision is made within a matter of minutes, although sometimes they may ask you to send in more documents.
If you are successfully approved, you will be presented with a loan agreement. The lender may offer you less than what you initially applied for. Please review this carefully and make sure you are happy before deciding to accept it or not.
If you accept the offer, you will receive the funds directly into your chosen bank account, often within 24 hours, with some lenders depositing funds instantly.
The lender will take payment from your credit or debit card automatically on the agreed repayment dates by ‘Continuous Payment Authority’ (CPA) until the loan is paid in full.
Get your loan quote today
Access from £100 to £5000†
Interest rates and charges will vary between lenders. The amount you borrow and the length will also have an impact on the cost of the short term loan.
Lenders that provide short term loans will fall under the FCA’s price cap for high-cost short-term credit loans. This regulation states that the maximum interests rate they can charge you is 0.8% per day and that you will never pay back more than double what you borrowed. If you fail to repay your loan on time, the default fees have also been capped at £15.
So, on a £1000 loan, the maximum interest would be capped at £8.00 a day, that’s 0.8%. The total you would pay back (including interest and fees) in this case would be no more than £2000 - twice the amount borrowed. These caps help control debts that spiral out of control.
According to the Financial Conduct Authority, not only have these changes helped 760,000 borrowers save around £150m per year, but they also led to - Cheaper loans for the customer, Better practice in assessing affordability, Fewer customers experiencing debt problems and driving up standards across the sector.
Calculate the cost of your short term loan by using our free repayments tool. Work out the estimated total amount that you’ll pay and monthly instalments in seconds.
Before you apply to borrow any money, it’s essential to consider a few things before you sign on the dotted line.
The most important thing to consider is, can you realistically afford a short-term loan? It’s not just working out whether you can repay the loan amount, have you considered the interest rate, too? According to the FCA, average borrowers are due to repay 1.65 times the amount they borrow - so calculate the loan accordingly.
If you’re having second thoughts, take a moment to think about what you’re using the loan for. Is it something you can save up for instead? Do you NEED a loan? Only apply for credit if you have exhausted all other options.
Read on to find out some additional things you should consider before applying for a short-term loan:
As a broker, ThisLender does not charge you any fees to use our loan comparison tool; this is a 100% free service, here to help you find the best loan deal possible. If you’re trying to seek out the top UK lenders, you’ve come to the right place; we only work with direct lenders in the UK.
Please note: the terms and conditions for each short term loan product are shared with you before you accept the loan offer; read these carefully and ensure you fully understand them. You will also receive all fees and applicable charges from the lender, so you can calculate whether the loan repayments in full are affordable and realistic.
Many UK lenders will still consider you for a short term loan if you’ve got bad credit or poor or no credit history. Although you may be limited to particular lenders, this doesn’t mean you won’t be accepted as many lenders will assess more than just your credit history.
Remember: Improving your credit score can help you get a better deal on your loan. Before you apply, you can check your credit score for free and get financial help and advice on how to help improve your credit score.
Is it not possible to receive a short-term loan without a credit check. However, the lender will only conduct what is called a ‘hard’ credit check one you’ve accepted the loan offer. In order to provide you with a loan offer in the first place, the lender will conduct what is called a ‘soft’ credit check. This kind of check doesn’t show up to other lenders or show on your credit report.
Because we work with direct lenders, the application process is usually quick and straightforward. To qualify for a short-term loan, you must be over the age of 18, have a UK bank account and be able to demonstrate you can afford the loan repayments.
As with any financial product, there are advantages and disadvantages - and it’s crucial you don’t just read through the pros - you need to research the cons in-depth. Borrowing money can get you into serious money problems if you’re unable to make repayments.
Once you receive funds, you can spend it on whatever you like. The most common reasons for obtaining credit this way is to bridge the financial gap left by emergency repairs, unexpected bills or travel costs. It is not a long-term solution; the clue is in its name, you should only be seeking out a short term loan if you can comfortably afford to pay the money back.
You shouldn’t use your short-term loan to buy anything deemed unnecessary such as retail therapy, other everyday essentials or gambling.
Not suitable for:
If you’re struggling with your money management, visit the Money Advice Service for impartial, free advice.
Comparing short term loans is a great way to locate the best loan deals. Interest rates vary massively, so it’s a good idea to analyse each lender side by side to understand what their offering is and how much you’ll pay back in full.
Please note, we are not responsible for the content on third-party websites.
Most short term lenders will offer loans from as little £100 up to £2500 or more. Just remember that you won’t be able to borrow the highest amounts if you’re a new customer.
Short term loans can typically range from 1 week up to 12 months, depending on the lender. Spreading the cost over a longer-term will reduce monthly payments but will increase the amount that you have to pay back. Choose a sensible length that’s affordable for you.
Repayments are automatically collected by recurring payments, also known as continuous payment authority (CPA) from the card details given when you applied on your agreed dates.
Continuous payment authority is slightly different to a direct debit. With a CPA, you permit the lender to take payments from a credit or debit card instead of giving your bank permission with payments coming directly from your bank account.
Although the qualifying criteria will be slightly different per lender, some of the most basic eligibility requirements include:
A short term loan and a payday loan may appear to be similar, but they do have their differences, including:
Generally, with a payday loan, the amount you can borrow is small, and repayments are usually made in one lump sum. Whereas with a short term loan, you can borrow more but repayments are made over a few monthly instalments - up to 12 months.
The APR stands for Annual Percentage Rate and is shown as a ‘%’ percentage value. It is used to give the total cost of the loan over a year, which will include the interest rate and all associated costs, setup fees and other charges. The APR helps you understand the total cost and also helps when comparing short term loans. The higher the APR, the more expensive the loan will be.
As short term loans are taken less than 12 months, the APR can appear sky-high, sometimes leading into the 1000’s.
The term ‘short term loans’ can describe a range of different products. The most common being:
These are taken over 1 or 2 months that are paid back in one scheduled repayment, usually on your next ‘payday’. You can read more about payday loans here.
Instalment loans are taken over a few months or more that are paid back in fixed manageable monthly ‘instalments’. Most lenders can offer longer term loans over a period of 12 months or more. Find out more about Instalment loans here.
If you are having financial difficulties or need to speak to someone regarding your financial situation before applying for a loan you can get free and confidential advice from The Money Advice Service, National Debtline or debt charity StepChange.
Get your free loan quote today
Access from £100 to £5000†APPLY NOW
Representative 97% APR (fixed)
Representative example: Borrow £1000 for 24 months at 24 equal instalments of £77.48. Total amount to repay £1,859.52. Interest £859.52. Annual interest rate 70% (fixed). APR rates range from 45.3% APR. to 1575% Max APR. Your APR rate will be based on your circumstances.
We are not a lender but a licensed credit broker in the UK