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Short term loans are offered by a range of online lenders and credit brokers, and were once commonly referred to as payday loans. The term payday loan refers to the loan period which is often very short and usually lasts 30 days, or when a person next gets paid. Short term loans are due to be repaid within a set amount of time, depending on the lender or broker.
Short term loans are a popular lending option to many people who need some extra funds before their next payday. Often an amount is selected that can be repaid within 30 days although some lenders and brokers offer larger amounts with longer loan periods.
Short term loans are offered by many lenders and credit brokers online and on the high street. Short term loans are unsecured and have high interest rates, and are expected to be repaid once the borrower receives their next pay check. For example, a short term loan company may offer a loan and charge £25 for each £100 borrowed. This interest covers a range of fees and financial features.
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taken from a selection of lenders
It's not just online lenders and credit brokers that provide this type of loan, banks also offer short term loans. They can provide short term loans for a lower annual percentage rate than an online lender or broker. An equivalent bank loan can have a slightly longer borrowing period which can be anywhere between 60 and 120 days, depending on the bank and the loan amount. Banks can offer a wider range of loan options and their installment loans can be borrowed over a longer period, often between one to three years.
Depending on the amount borrowed many banks will require assurances and secure the loan against the borrower's property or belongings. The smaller the loan, the less likely the bank is to going ask for it to be secured. A secured loan application is longer as the bank will check the borrower's credit to check the borrower has the ability to pay the loan back. If a small business wanted to borrow money, the lender, broker, or bank would review the business's cash flow history. When an individual wants to take out a short term loan a lender or broker may look at the borrower's personal credit score to determine whether they are eligible for a short term loan.