Short term loans and finance can also act to improve your credit score, as long as you manage the loan responsibly and make your payments on time.
One of the underlying reasons for increasing numbers of people turning to short-term loans and financial arrangements, turning away from many of the well-known payday loan providers is the greater degree of flexibility and understanding that is part and parcel of short-term finance packages.
Rather than having to agree to a month-long arrangement, as with payday loans, whereby the loan must be paid off by the borrower’s next payday to avoid large interest penalties, short term finance allows there to be a more amicable and understanding relationship between the borrower and the lender.
This has meant that much of the stress associated with payday loans has been circumvented. With a short-term loan for example, customers tend to have greater breathing space and better structure, meaning that repayments will more commonly be paid on time, returning the lender’s money and avoiding the borrower having to shell out large amounts of interest on top of the agreed loan amount.
The options available to prospective short-term borrowers have never been greater. Gone are the days where a desperate borrower’s options were limited to loan sharks and extortionate lenders. The Financial Conduct Authority (FCA) has introduced strict regulations and controls to the lending markets in the UK.
On top of this, the emergence of more short-term finance providers means that there is healthy competition as well as sensible regulation to protect borrowers from previously extortionate lenders and reasonable lenders from unsafe borrowers.
While there is an abundance of options when looking for short-term loans and finance arrangements, the underlying principles of borrowing and taking out loans still applies as it always has. These principles include:
The beauty of short-term finance is that it is a comfortable medium between the likes of payday loans which tend to not last longer than a month or two and long loans from large providers such banks where the repayments last over a number of years.
Say for example your boiler breaks down in the height of the winter months and you are quoted £1,000 to fix it, but cannot afford to pay for a few months, as your income left over each month after paying for essentials is only £400. Rather than having to suffer until you have saved up the money, you could arrange for a 6-month short term loan of £1,000.
This loan, subject to due diligence and credit checks can see the money in your account within 24 hours, which would allow your boiler to be repaired in a matter of days rather than months. You could start making your repayments immediately and you would have it all paid off in 6 months, with no extra charges or unreasonable interest payments incurred.
There is no shortage of providers and brokers of short-term finance and therefore there is no need to panic and just go with the first option that you discover.
It is important to take the time to do your homework and your own ‘due diligence’ checks on each potential lender you consider. What would the monthly repayments be? How long will the amount be taken out for? Are they fully regulated by the FCA?
All of these questions and more should be considered before you enter into any short term finance arrangement with any lender or provider. You should also once again reconsider if there are any other routes of finance, short term or otherwise that you can explore and that perhaps won’t necessarily impact your credit score.
Any provider of short-term finance will need generic details such as your name, address, current marital status, contact details and more. Lenders may also ask slightly more detailed questions in order to satisfy their criteria and lend you the amount of money you need. They may ask for a breakdown of a number of months’ worth or expenditure and income and this is completely normal.
They will then carry out the relevant checks which, all going well and smoothly will lead to the granting of your loan amount and the money being deposited into your dedicated account, subject to terms and conditions.