When faced with unexpected bills that can take you by surprise, knowing what to do next isn’t always easy. You may be thinking do you have enough savings, can the bill be delayed until you are next paid, and are there any other options to help? This is where a short term loan may provide the solution you’re looking for.
As not everyone will have available credit or savings to immediately help them or friends and family to help them out temporarily, borrowing is usually the next best option. You can always try to speak to the company you owe the unexpected bill for and delay payment until your next payday, but this may not always be possible. If a short term loan is the right solution, what do you need to know about them first?
What Are Short Term Loans and How Do They Work?
Any financial situation that is expected to be short term, is for a small amount of money, and is not something related to any ongoing financial difficulties, can be suitable for a short term loan. Usually available quickly online, they enable you to borrow up to £1,500 and choose repayment terms between 3 to 6 months depending on how much you can pay each month.
Ideal for emergency expenses, they can be the helping hand you need when you have no other suitable options available, with many lenders able to approve an application and transfer the funds the same day.
They are unsecured like a personal loan, meaning no guarantor or personal property is required to secure them, but they may come with higher interest rates compared to these loans which you will need to consider before applying. Most lenders have a loan calculator so that you can work out how much a short term loan with interest will cost in total and what the repayments will cost. This is so you can make an informed decision to match your budget.
The application process can be completed online very quickly, with just a few personal details required. You will usually have to provide proof of income and identification to the lender and undergo credit and affordability checks before the lender can approve the loan. This is to ensure that the loan is sustainable for you – if not, they will have to decline.
Once approved, funds are usually transferred quickly by the lender to your bank account, often within the same day or if not possible, the next working day. This makes them ideal for emergencies when you need money fast.
When to Use Short Term Loans
Short-term loans can be useful in various situations where you need access to immediate funds. As long as it’s needed to cover unexpected expenses or financial emergencies, you can choose to use them how you want to once the funds are approved and transferred to your bank account. Here are some of the common reasons why you may need one:
- Urgent Expenses – Short term loans can provide quick access to cash to cover urgent bills such as car repairs, or home maintenance costs. Anything that can be deemed an emergency and isn’t non-essential (such as funds to cover a night out or holiday) can be suitable.
- Temporary Cash Flow Issues – If you’re facing a temporary shortfall in your income due to delayed wages, for example, or an unexpected expense that can’t wait until your next payday.
- Avoiding Long-Term Debt – Instead of accumulating high-interest credit card debt or even overdraft fees, a short term loan can offer a more affordable solution for covering immediate or emergency expenses.
No matter the reason you may need a short term loan, it’s essential to use them responsibly and only when necessary to avoid falling into a cycle of debt. They shouldn’t be used to cover non-essential needs or any existing commitments such as other debt repayments or regular outgoings like your mortgage or rent. If used as intended, a short term loan can be a helpful way to keep your finances on track.
What To Consider Before Applying
Before applying for a short term loan, just like any type of borrowing, you need to be sure of your current financial situation. Whilst they undeniably have benefits, you need to ensure that borrowing in the short term is right for you. Think about the amount you need to borrow to cover your emergency expense and whether the interest charge on top of this is affordable for you. This will ensure you can comfortably afford the repayments and sustain them.
Always consider your options and if there are no other suitable ways to resolve the situation, be sure to choose a lender who is transparent, Financial Conduct Authority (FCA) authorised, and will treat you fairly as a customer.
By fully understanding how short term loans work and when best to use them, you’ll be able to make an informed decision that is best for your finances, resolving your financial emergency fast.
Author Bio: Kelly is the founder of the Cashfloat blog and has been working tirelessly to produce interesting and informative articles for UK consumers since the blog’s creation. Kelly’s passion is travelling. She loves her job because she can do it from anywhere in the world! Whether inspiration hits her while sitting on the balcony of a French B&B, or whether she is struck with an idea in a roadside cafe in Moscow, she will always make sure that the idea comes to fruition. Kelly’s insights come from her knowledge gained while completing her degree in Economics and Finance as well as from the people she meets around the world. Her motto is: Everyone you meet has something valuable to teach you, so meet as many people as you can!
