You may consider a short-term loan for any emergency, like receiving urgent medicines at home. No documentation, limited checks, and easy applications provide a seamless experience. However, the deal doesn’t end there.
You must repay any loan that you take within the given deadline. Short-term loans usually come with a repayment period of 12 months or a year. Thus, they eliminate the hesitation to commit to a lengthy tenure.
It involves an agreement that lists APR, interest costs, and monthly instalments. Accordingly, you must pay the loan provider. You don’t have to send the approval immediately. Instead, analyse the loan terms well.
Check the aspects that may affect your monthly payment. Yes, things like- critical cash emergencies, income drops, or unemployment may impact it. Thus, ensuring a comfortable repayment period is essential. The blog details all about short-term loans and the best repayment methods.
A brief about short-term loans
Short-term loans are quick finance facilities with small repayment schedules. One can borrow an amount and pay it within weeks or months. Usually, the pay limit is just 3000 for 12-36 months. You can get one without staking a collateral or providing a guarantor.
The loan does not prioritise credit rating as the only qualifier. Instead, it undertakes an individual’s income, financial stability, and management. Individuals with consistent income and low liabilities get instant approval. However, interest rates stay competitive. Choosing the right repayment term also affects the interest amount. Usually, choosing a small repayment term of 3-6 months is advisable.
What does a short-term loan help you with?
Options like short-term loans from a direct lender may be useful to meet immediate expenses. It could be something that you struggle to pay for. Individuals cannot save for every need. Unexpected requirements call for an instant cash solution. You can use the loan for the following purposes:
(Common uses of short-term loans)
How does short-term loan repayment work?
You may spot a repayment term section on the loan application. It lists the week, month and year that you want to pay the amount within. Most individuals seek to repay the loan quickly. Thus, they choose a shorter repayment term. The smaller the term, the lower the interest you pay. However, certain financial circumstances prevent one from repaying quickly.
Here, he chooses monthly payments to reduce the burden. In this case, expanding the payments to 12 months may help. It reduces the monthly instalments to make. It is an ideal standard for individuals with multiple liabilities but low income.
You must repay the principal amount plus interest costs by the deadline. Missing any payment leads to additional penalties and increases interest. Thus, budget for it or schedule direct debits to pay comfortably.
For example- you borrow 2400 for 12 months at 6% interest rates. You need to pay 2478 by the loan term. However, here is how your repayment may look if you repay it in 36 months.
| Parameters | Short-term loan for 12 months (in pounds) | Short-term loan for 36 months ( in pounds) |
| Borrowing amount | 2400 | 2400 |
| Repayment term | 12 months | 6 months |
| Interest rates | 6% | 6% |
| Monthly repayment | 206.56 | 73.0 |
| Total amount payable | 2478 | 2628.46 |
Thus, you may benefit by choosing a smaller loan repayment term. However, there are some aspects that borrowers should consider. It is more than just income or the amount you need.
Expert Tips that may help you repay the dues without worries
One does not know about monetary situations. It may change for good or bad, often unpredicted. Thus, one must be ready for the worst and prepare repayments accordingly. The current repayment plan suits you but may not if circumstances change.
You can seek advice from popular platforms like Citizens Advice or Stepchange experts. However, the first thing to do is contact the loan provider, and he may help. Here are some tips to avoid repayment difficulties:
1) Cut your basic expenses
Identifying the usual monthly expenses may help. You may spot the best ways to reduce some costs that you incur unnecessarily. It could be planning weekend trips, eating out or credit cards. Avoid applying for credit cards without requirement. It only exhausts the available limit. Similarly, exploring the expenses would help you save money. You can instead use it to repay the loan.
2) Borrow only an affordable amount
It is one of the costliest mistakes that individuals commit while borrowing. Don’t factor in the amount you need. Instead, check how much you can afford. Individuals with low monthly liabilities and high income can borrow flexibly.
However, if you lack a decent income and credit score, think again. Can you cover the loan dues without defaulting? Think about the possibilities that may affect payments. For example- if you can afford to repay only £1500, don’t borrow over £1200. It may prove an unnecessary burden for you. Moreover, individuals with low credit scores should borrow consciously.
An unaffordable amount may affect your overall finances. Thus, explore the best direct lenders for bad credit for personal loans. A short-term loan is also known as a personal loan. Take the help of the required loan provider to know your affordability. He may help you by using his expertise and knowledge. They work in the best interest of the customer. It may help you ensure a legitimate and easy-to-pay loan.
3) Switch to a cheaper loan
According to the MoneySavingExpert platform, Martin Lewis, CEO, “ Switch to a cheaper loan if you cannot pay the present one”. It helps you cut the loan costs and makes it affordable for you. One way to do so is by refinancing the loan. However, it may not be ideal for everyone.
Refinance only if the current amount is affordable. Moreover, check the interest rate. Can you benefit from low interest rates? If yes, you can reduce your liabilities. It makes you pay lower than the existing agreement.
Bottom line
A short-term loan is ideal for small but crucial cash emergencies. You may need one for boiler repair or paying the bills. Not everyone can save enough for a rainy day. Thus, having a side partner to tap helps. Short-term loans are your pal for immediate cash requirements. You can tap it after considering the purpose. Borrow only that is under your affordability to repay. It will help you avoid complications or face debt arrears.
Jessica Rodz is the Senior Content Writer at Cashfacts. She has a long career in the field of content writing and editing. Jessica has the expertise in the UK lending marketplace where she has worked with 7 different lending organisations and acquired many responsibilities from preparing loan deals and writing blogs for their websites.
At Cashfacts, Jessica is managing a team of experienced loan experts and doing a major contribution in guiding the loan seekers via well-researched blogs. She has done graduation in Business (Finance) and now currently doing research papers on the UK financial sector.
