Considering a short term loan?
Short term loans are typically cash loans scheduled to be repaid in less than twelve months.
If you are facing a unforeseen circumstance and are thinking about taking a short term loan, you should think carefully on whether you can manage without taking this step. Here are three questions you should ask yourself:
How much cash do you need to borrow? Think about how much cash you actually need from a short term loan to meet your needs. You should try not to borrow more than you actually need as you will be repaying this and interest on the total borrowed.
Do you really need a short term loan? Think about if there is another way you can bridge your financial gap without the need for a loan. See our money saving tips blog section for more information on stretching your existing budget, so your payday goes further.
How long do you need to borrow the money for? Again consider this carefully. A short term loan could be borrowed and repaid over anything from a few months to a year. Don’t stretch your finances to repay it faster than you are realistically able, but also don’t extend the loan period out longer than necessary. Your affordability each month is a vital consideration to your instalment amounts which is driven by the amount borrowed and loan term. For example, the interest rates offered will vary a little depending up on how long you are taking out the short term loan for, e.g. 3, 6, 9 or 12 months.
Finally do plenty of loan comparisons and be aware of the pros and cons of short term loans versus credit cards and so called payday loans (short term loans which are usually paid off in a month) With a credit card or a payday loan there is arguably more temptation to continue borrowing or to fall into the payday loan cycle each month. With a short term loan you are usually borrowing a specific amount of cash for a specific period of time and you shouldn’t be tempted into further borrowing.