If you need some quick money to tide you over for just a short time loans are still worth looking into. Our guide helps you work out what you need and explains how to find the best short term loan.
If you need access to extra cash but know you’ll shortly have the means to pay it back, a short term loan might be just what you need.
Secured loans are often the cheapest because you use the equity you have in your home as collateral, reassuring for the lender; but most short loans tend to be unsecured as they are not held for long.
This means it’s even more vital that you shop around to find the best deal and the best value. Before you start looking, consider the following points to help you search for exactly what you need.
Calculate how much you need to borrow
How much you choose to borrow will determine the range of loans available and their interest rates. If it’s a smaller amount, you might find that the rates are higher with the high street banks, so make sure you shop around and look into short term loans online. The more you borrow, the more interest you’ll need to pay back, so try to work out exactly how much you need.
Investigate any fees on short term bank loans
Any fees the lender applies to your loan application should always be considered as part of the overall cost. Particularly for smaller, short term loans, fees can form a substantial part of your overall outlay, so keep an eye out for these, including set up charges and early repayment penalties.
Beware the eligibility criteria
Your credit rating will be an important factor when lenders decide whether to give you short term unsecured loans or not. If you apply for lots of credit in a short period and are turned down, you’ll look too eager, so it’s best to only apply for loans that you have a decent chance of being offered.
Read our article explaining How to check your credit report, as doing this should give you an idea of how easily you’ll find a company willing to lend to you, and also check the eligibility requirements per loan to make sure you meet their terms and conditions:
Your age (for example that you are aged 21 – 65)
- That you have been a UK resident for three years or more
- That you have a current account
- That you have a regular income
Choose a fixed or flexible loan
The advantage of a flexible loan is that you can repay the loan early, if that suits you better – this can be especially useful if you’ve just borrowed the money to tide you over until an expected windfall arrives. Our guide How to find the best flexible loans looks at the pros and cons.
A fixed loan will most likely charge a fee if you want to pay the loan off early but will often offer lower rates. The lower rates of a fixed loan will be less of a draw if you’re likely to want to make overpayments. A flexible loan will charge a higher rate, but if you’re able to pay the loan off quicker, you’ll pay less in interest overall. Compare both options to see which is cheaper, as the overpayment charges on a fixed loan might be small enough that it still works out as the better option.
Decide on your loan term
If the loan is just a short term one to keep you going until you receive some funds your waiting for, this will govern the period you pay it off over, so try to find a term that matches when you want to pay it back.
If you want to pay it off in instalments with your regular income, a longer term will keep your monthly payments lower. But paying it off quicker will reduce the total amount of interest you pay, so try to go for the shortest term you can while making sure you’re able to comfortably make the monthly payments.
Find the best interest rates
The interest rate on your loan will make a big difference to your repayment amount, so searching for the best rate you can find is important. If you choose a variable loan, the interest rate could go up or down, so your monthly payments may potentially increase. Fixed rate loans allow you to pay the same amount each month, which makes it easier to budget.
The Annual Percentage Rate (APR) is the interest rate the loan is advertised at. It isn’t guaranteed that this is the precise one you’ll get, as they’ll charge higher rates for lenders they see as being riskier, but the APR will give you a way of comparing your loan options.
Compare short term loan lenders
Once you’ve worked out what kind of loan you’re looking for, compare the deals out there using our short term personal loan comparison to look at your options side by side and find the lowest interest rates.