If you need cash for an emergency and you have no one to help you, taking a small loan is the best option. Short loan, as the term implies, is a loan that comes in small amounts and is payable in less than a year. Borrowers include entrepreneurs, business people, and individuals that need money immediately. Residents of the UK usually take a short term loan to answer their dire need.
Features of a Short Term Loan
A short term loan has several functions. First, borrowers could take only a small amount. Most lenders charge a high annual percentage rate or APR. Third, you do not need to provide security or anything of value that you own to borrow money. Because of the small loan amount and short repayment period, putting up collateral is unnecessary. Last, the repayment period is short, which is usually less than 12 months. However, you must pay the principal and the interest at the end of the repayment period to avoid penalties.
Types of Short Term Loans
There are several types of the short term loan to suit every borrower and their needs as follows:
A payday loan is a type of short term loan that offers small amounts that the borrower must pay on his next payday. You can borrow up to £200 or more, depending on your capability to pay. You must pay back the principal plus the interest after 30 to 35 days. Applying for a payday loan is the quickest way to get cash for your dire need. The lender requires proof of UK residency, bank details, your income and expenses, and the name of your employer. You would have the funds in your bank account a few hours after the application.
Line of Credit
A range of credit is an amount that a lender would allow you to spend money at a specific limit. You can get the fund as a lump sum or on an instalment basis. If your line of credit for one month is £500, you may spend all or only a partial amount like £300. Once you have paid the money within the month, you would have another line of credit that you can spend. The lender would only charge interest for the amount that you spent and not for the credit line. If you only spend £300 from your £500 credit line, only the £300 would earn interest.
No Credit Check Loans
Banks and financing companies conduct a credit check on loan applicants. However, some lenders do not practice credit checks. These agencies have their way of determining the creditworthiness of each applicant. No credit check loans are popular in the UK because even those with bad credit could borrow money.
A logbook loan is a credit that you can take using your car as collateral. Some lenders would offer a loan equivalent to 70% of the cash value of your vehicle. If your car is valued at £10,000, you could get a loan of £7000, which you must pay for 12 months or less. However, if you default on your credit, the lender can seize your car and sell it so that you can pay your mortgage. You can pay your loan in advance, and the lender would not penalize you.
Direct Lender Loan
As the term implies, you borrow money directly from the lender. You can avoid some fees because you do not have to pay the costs of a middleman. The lender would also explain clearly the terms of the loan and notify you if there are some changes.
Having access to short term loans is helpful when you are out of cash. Promptly paying back would enhance your credit score so that you can quickly get a loan when the need arises.