Short Term Loans UK

Short term loans have become very popular in the UK over recent years, and their popularity is increasing annually. These loans are designed to help people pay for urgent bills. You can apply with an authorised direct lender, and they will usually fund your bank account the same day. Read on as FamilyMoney explores why a short term loan can be a good idea and how to compare short term loans in the UK.

What is a short term loan?

A short term loan is simply a loan with a shorter repayment period than a conventional long term or installment loan. For example, you may borrow £2000 from your bank for 8 months – this is a short term loan, as opposed to a longer loan for 3 or 4 years.

The main advantage of a short term loan is the repayment period. Instead of making payments over a long period of time as you would do with a long term loan (sometimes known as instalment loans), your loan is repaid much faster, usually in 12 monthly repayments or less.

What are short term loans used for?

Short term loans are typically used for unexpected expenses, such as household emergencies like a washing machine repair, plumbing issues or a vehicle breakdown.

Everyone experiences unexpected expenses, which can catch us off guard, especially when the family budget is tight, and there is not much money to spare at the end of the month.

If you suddenly develop a problem with your car and the repairs will cost £1200, this can be a significant problem. In the circumstances like these, short term cash loans are a good solution.

Short term personal loans vary in size and interest rates.

Can I get a short term loan with bad credit?

Getting a short term loan with a less than perfect credit score can be difficult from any bank in the UK Banks tend to only lend to people with an excellent credit history. However, many direct lenders in the UK specialise in short term loans online and payday loans for people with a poor credit history. These lenders weigh affordability over your credit score. As long as they see that you can afford the monthly repayments, they will happily consider your loan application. We recommend you use a loan calculator to determine how much you can afford to borrow before submitting your loan application.

Be aware of the interest rate if you take out a short-term payday loan, as some companies charge much higher interest rates than conventional lenders.

Shop around and compare different UK short term loan options before you sign anything. You should also be aware of your rights when applying for a payday loan and how to protect your data.

Alternatively, if you are looking for short term credit to cover an emergency expense, you can always borrow credit from a pawnshop in the UK.

Short term loans with no credit check

The Financial Conduct Authority require all lenders to perform a credit and affordability check before approving a loan. Any lender offering short-term loans with no credit check is probably not FCA authorised and will charge very high-interest rates.

Stay with companies that are legal and regulated by the Financial Conduct Authority, the regulatory body which covers lenders in the UK. You can always check the Financial services register to see whether they are a regulated company.

Note: Borrowing money that you can’t afford or making a late repayment can cause you serious money problems and adversely affect your credit rating.

A credit check is a legal requirement for UK lenders.

Frequently Asked Questions

What is the difference between short term loans and payday loans?

The main difference between short term loans and payday loans is usually the number of repayments you make. Payday loans are typically paid back in one lump sum on the borrowers’ next pay. Whereas short term loans can get repaid in up to 12 flexible repayments giving you time to get back on your feet financially.

How can I get the best short term loan rates?

Before borrowing money, shop around and compare loans and interest rates to ensure you get the best deal. When comparing short term loans, consider hidden fees on loan and if the direct lender charges additional fees to repay your loan early.

What do I need to be eligible for a short term loan in the UK?

Below is the basic eligibility criteria all direct lenders require:

  • Be a UK resident
  • Hold valid UK bank account details
  • Be 18 years +
  • Have a steady source of income (this may include benefits and pension)

Can borrowing a short term loan improve my credit score?

The answer is yes. If you make your monthly repayments on time, this can positively affect your credit file, as this shows that you are a responsible and reliable borrower. However, we don’t recommend that you take out a short term loan with this intention alone.

Jump To A Category

Quick Read: Money Magazine