Best Ways To Get Short Term Loans In 2022

March 11, 2022
Shortterm loan

Even with the best financial planning there arise some unforeseen circumstances such as unexpected utility bills, medical expenses or car repair. In such situations, you need quick funds for a short period to fulfill your financial requirements. In this guide, we are providing some best ways to find the best short term loan that meets your needs.

KeyPoints:

Understanding Short Term Loans
Things To Consider Before Applying For Short Term Loan?
Who Can Get A Short Term Loan?
Can You Use A Short Term Loan For?
Why Consider Short Term Fundings?
Drawbacks Of Short Term Loans?
Can You Find The Right Short Term Loan?

A short term loan can be an ideal solution to raise funds and spread the cost. There are several options from which you can choose the right loan product according to your circumstances. You may know that taking out a personal loan is difficult especially when you are looking to borrow for a short amount of time.

People also search for funds that keep them going till their next pay cheque. However, most traditional lenders and banks are likely to offer long term debts due to the interest amount that they can get during this period.The good news is that there are some lenders in the UK willing to lend for a short period.

One thing that we want to recommend straight off the bat is that you should treat debts like all other products that you are shopping for. Lenders offer you a wide range of loans. Some are better than others while some fits best in your situation than the others. Thus,it is essential for you to look around the market before choosing a debt in particular.

“The Best way is to use a price comparison site and find a lender offering the best available deals.”

Understanding Short Term Loans

Short term loans are types of borrowing with a short repayment period. For example, a personal loan usually has terms of maximum 12 months. However, loans with one or two year terms are also considered as short term, “if you want to borrow money for a less time you can look to the alternatives of short term finance.” You can use short term debts for a number of purposes. Such debts become available quickly as they usually do not need any collateral such as a property or car. You can apply online and make decisions in minutes.

Things To Consider Before Applying For Short Term Loan?

Before you rush and apply for a debt, you should take time to find which type of credit suits you the best. Most people think that taking out short term borrowing is the only solution that they can get an affordable credit but it is not the fact. There are many other ways that can help you to have a good credit level without taking out a debt. All of these methods may not be appropriate for everyone but they are worth considering before committing to expensive borrowing.

The first thing you should do is ask yourself how much money you want to borrow. It is a vital question for many reasons such as it makes you realistic about the purpose of borrowing. It also helps you to not take out an amount that is unnecessarily big, because if you do so you have to pay interest on additional cash.

The next thing to think about is whether you actually need to borrow money. It means that you should look for other ways to fulfil your objective. For example, if you are borrowing to purchase some product you should consider different routes.

“Short term loans UK are sometimes the most expensive way of borrowing so you can use credit cards to purchase a product.

The last thing that you should consider before taking out any type of credit is how long you want to borrow money. In this aspect you need to be extremely realistic and never underestimate the time that you need to repay the borrowed amount. Otherwise, you have to pay a penalty if you are not able to repay on time.

Once you find the answer to these three questions, it is time to decide which type of loan product is right for you. Here we are describing different options that you can consider to secure the right type of debt.

1. Payday Loan

It is a type of short term loan that allows you to borrow a small amount of money until your next pay arrives. You can get this type of fnacong from high street lenders or online payday lenders. You can usually get an approval within minutes to hours and directly receive cash in your bank account. However, you should remember that the interest rate on payday loans is high so it may not be a budget friendly option for you. You should repay the borrowed amount on the due date or you have to pay late repayment fees. You can use this amount to fulfil current financial needs such as to pay a bill or car repairs.

2. Logbook Loans

A logbook loan is a type of short term secured funding. You can get this type of loan by using your vehicle as a security against the debt. You can not borrow an amount more than the value of your collateral. Lenders only provide an amount that is half of the value of your vehicle.

“So it is best for you to shop around and find a lender offering a large amount of money.”

It is not the right product for you if you do not have a car or vehicle to use as a collateral. Although you can get the required amount of money, there is a risk of repossession of your vehicle if you are not able to repay the borrowed money.

3. Revolving Credit

A revolving credit is also known as a flexible financial tool due to the facility that it offers to the borrowers. With such a type of finance you can withdraw money, repay and withdraw again. Your provider sets a credit limit to your account that describes the maximum amount that you can spend using this type of debt. You can either repay the debt amount at the end of the billing cycle or on a monthly basis.

“Once you pay off your loan amount you can again spend or draw within your credit limit.”

When you take out such a debt you may also have to pay some fees including origination fee, annual fee and fees for missed or late repayment. Read More

4. Interest-Free Overdraft

Another way through which you can secure a good amount of money for the short term is having a bank account that offers free overdraft. Most banks and building societies generally offer overdraft but it is not always interest free and in fact some of them are highly expensive. So, you should always check terms and conditions before jumping into an overdraft.

“It is easier to get this type of debt compared to credit cards but it does not mean anyone gets it.”

You must have a good credit score to secure this loan. If you are a student you should go for a student account because most of them offer free overdraft. You have to pay a high interest rate when you are unable to ensure that you will repay your outstanding balance on time.

Like other types of credit the amount you can borrow and time for which you can vary from provider to provider. Typically you are able to use interest free drafts for up to 12 months after opening your bank account. If you have a good credit score and financial history you can take out large amounts to fulfil your needs.

5. Bridging Loans

It is a type of short term loan UK that is usually used to complete the purchase of a property. It is very beneficial for property developers and investors who need quick access to funds. The loan terms usually range from 3 months to 12 months. But now many providers are offering long term bridging finance that can last upto five years. If you want to take out this type of debt you must have a valuable property to use as a collateral, a strong exit strategy and clean credit. Most lenders do not consider your credit score if you have a strong exit strategy. The amount you can borrow depends on the equity that you have in the security property. You can not take out an amount more than the value of your property. However, if you need a huge amount you can use more than one property as security against the debt.

Who Can Get A Short Term Loan?

There are several short term loan providers in the UK and the eligibility criteria can vary from provider to provider. Here are some general requirements for short term borrowings:

You should be of 18 years or older
You must be a UK resident
Have a proof of income
Have proof of your address for past three years
Your bank account details
Email and mobile number
You must not be bankrupt.
You should have a good credit score and pass an affordability check.

If you want to get quick approval to any type of debt you should try to meet the eligibility criteria.

What Can You Use A Short Term Loan For?

Typically short term funding is used for unexpected and temporary expenses. You can take out funds to pay your unexpected utility bills, pay medical expenses, cover car repair costs, refurbishment or renovation of a property and in any other unexpected event.

If you are a small business owner or a start-up business, you can take business loan and use short term borrowing for the following purposes:

1. Finding A Startup

If you are a startup business you may need quick funds to make your business operating as soon as possible. For example you can use invoice discounting to improve your business cash flow. You can get funds against your customers’ outstanding invoices within days and repay the loan amount when your customers pay you.

You can use these funds to purchase new assets, cover legal costs, pay wages, cover legal costs and cover the rental cost.

2. Financial Growth

If you are looking to grow your business such as to increase your product range or open a new office, you must have enough funds to cover the cost involved. When your sales increases your production cost also increases and you need more funds to pay suppliers, employers, deliveries and more. In the initial stages of expansion you may need small and a short term business loan can be an excellent way to aid such growth.

Protect Against Surprise Expenses

No matter how efficiently you manage your business finances, there are some unforeseen circumstances when you need urgent funds. It is always better for SMES to have hands-on emergency funds. Short-term debts can help you prevent financial problems if your business is hit by surprise expenses.

Why To Consider Short Term Fundings?

Short term borrowing offer numerous benefits to the borrowers some of which are as follows:

Quick Funding

One most significant advantage of short term debts is that you can get quick access to funds and fulfill your requirements. In this type of lending, lenders find less risks because there are less chances of borrowers’ ability to change within a short time frame. As a result, lenders take less time in underwriting and grant funds quickly.

Short Time For Incurring Interest

You have to pay short term debt within a year, so there are less total interest payments. The less time you take in repayment the less interest you have to pay.

Easier To Get

Short term funds act as a lifesaver for small businesses and for individuals who have a below-average credit score. The eligibility requirements for such debts are easy to meet because you are borrowing small amounts.

Are There Any Drawbacks Of Short Term Loans?

Although short term funds bring several benefits, it is always essential to recognize the challenges that come with this type of borrowing. Here are risks that you should be aware of before applying for short term debts:

1.High Interest Rates

Often short term loans have a high interest rate compared to the long term ones. As a result it becomes an expensive way of borrowing.

2.Borrowing Cycle

Short term funds have a tight time scale for repayment and hgh interest rates that can result in individuals needing more cash again. And it becomes hard for you to come out from this borrowing cycle.

3. Late Repayment Fee

If you can not stick to repayment terms and not pay the borrowed amount on time, you have to pay late repayment fees. It results in increased borrowing cost.

How Can You Find The Right Short Term Loan?

Whatever product you select to take out a short term debt, you should always do research and shop around to find the best lender. In addition compare following features to find a suitable and affordable option:

Compare the annual percentage offered by different lenders so that you can get the cost effective rates and cheap short term loans.

When choosing a lender always consider the flexibility offered in repayment terms and whether you can repay early or not.

Moreover, take into account the interest rate is fixed or variable and what will be the effect of change of interest rate on your repayments.

Bottom Line

Short term loans are valuable options for individuals and small businesses. You can get many benefits such as easy application, quick access to funds and easy to meet eligibility criteria. However, you must always keep in mind that the interest rate of this type of debt is higher than the long term debts.

When you think about taking out a short term debt you should always shop around to get cost effective rates. You can use online comparison sites like short term to get a quick comparison of the top lenders in the market and help you in finding the best short term loans at an affordable rate.