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How To Get A Short Term Loans In The UK?

There comes a time where we need a little bit of financial assistance, and there can be many ways to get it, be it through getting a part-time job, using your personal savings, or getting funds through a loan. Those are all viable options but the one we’ll be focusing on are loans. Specifically, short-term loans.

What is a Loan?

A loan is where you borrow a specific amount of money, or credit which needs to be paid back in a certain amount, which comes with a fixed or variable interest rate. Depending on your lender, you can have a loan term of a year to 10-20 years, depending on the type of loan and the amount you’re borrowing.

What is a Short-Term Loan?

A short-term loan is a loan that is meant to be repaid in a short amount of time, specifically less than a year. A short-term loan is great for those who small business owners or those who want to build their start-ups but aren’t eligible for the usual mainstream loans. Why? For starters, short-term loans only involve a small amount of cash ranging from a $100 to a $100,000, depending on your lender. Which means it’s less of a risk for the lenders, especially if you can show them that you are capable of repaying.

Characteristics of a Short-Term Loan.

It’s called a short-term loan because of how quickly it needs to be repaid. Which usually is around six months to a year, any more than that – then it will be considered a medium or long-term loan.

There are also some short-term loans that won’t give a specific time-table in which it needs to be paid off, rather – letting the borrower pay off the loan in his/her pace. Longer term loans would range from over a year to 25 years, which can be quite expensive due to the interest adding up.

Types of Short Term Loan

  1. Merchant Cash Advances

This is more of a cash advance but still acts and is considered to be a loan. How this works is that a lender will provide the borrower with the money, then is repaid by allowing the lender to have access of the borrower’s credit, and each time the borrower does a purchase, a percentage of that amount will be taken by the lender.

  1. Lines of Credit

A line of credit is just like using a business credit card. You get set a certain amount of credit limit and you are able to tap that credit whenever you need it. The monthly payment is dependent on how much credit the borrower took. One advantage with this type of loan is that it has low APRs or annual percentage rate.

  1. Payday loans

Payday loans are very easy to obtain as lenders won’t particularly care about your credit score or history so long as you are able to repay or prove that you have an income. A payday loan is usually taken out as a last resort because it often comes with predatory rates – which if you manage it poorly, can result in being in a loan spiral. One of the many disadvantages of a payday loan is that it requires to be paid off in one single payment when payday comes. Repayments are made by writing a check of the amount plus interest that the borrower took out, or the lender takes out owed amount directly from the borrower’s bank account.

  1. Instalment or Online Loans.

One way of getting an easy loan is through online. Processing and filling up forms can be done in the comforts of your own home and the process will only take a few minutes. Once your application is approved, the funds will be immediately wired to your account.

  1. Invoice Financing

This is done through a business’ accounts receivables – which usually are the invoices that are yet to be paid by the customers. A lender will come up with the interest according to the number of days or weeks that the invoice has been unpaid.

Advantages of Short-Term Loans.

  1. Shorter time for getting interest.

With it needing to be paid off within less than a year, you pay less on the interest; which compared to long-term loans that needs a few years for the loan to mature, interest paid is significantly less on a short-term loan.

  1. Quick Funding Time

This is great especially to those borrowers who are in dire need of financial assistance. Short-term loans are less risky for the lenders compared to long-term loans because of the shorter maturity date. As a result, it makes processing of the loan application easier for the lender, letting the borrower obtain the funds as soon as possible.

  1. Easier to acquire

Short-term loan requirements are much easier to meet, thus making it accessible to those who have less or not so perfect credit scores. Great for individuals or business who are in need of a quick injection of money.

Disadvantages of a Short-Term Loan.

One disadvantage of a short-term loan is that it’ll only provide small amounts, and if you need more, you might find yourself taking out another loan. Also, with it having a shorter period of time to be repaid, it can act as a double edged sword. Especially when you’re already having trouble making ends meet.

And that is why a short-term loan must not be treated as a solution for your problems, rather than a Band-Aid. One way of avoiding the need to take out loans in the future, you must address the root problem.