Short term loans and how to select the right option

When considering short term loans and the repayment terms they have to offer, thankfully there is a good selection of choice which exist. Short term loans are also known as payday loans and online loans and more recently; instalment loans. All of these names cover the resource officially defined as ‘short term and high cost’ borrowing. These loans are different to borrowing which is considered as mainstream because of the sums of money being lent and the terms of repayment being offered. Whereas a bank loan may be repaid over a number of years, short term loans are instead repaid over a much shorter period of time. Equally when looking at the same example of a bank loan, the loan sums being considered are generally large in value, ranging up into the tens of thousands, with these online loans the average loan value is around £300.00. So clearly there is a big difference between the short term loans and the more traditional and longer term lending options which also exist. As consumers therefore we need to be aware of this and select these resources with care.

A short term loan may be a great tool for those of us who experience a cost which was not planned. Whereas the likes of our rent and car insurance needs to be paid for each and every month, an emergency dental treatment is a little more difficult to plan for in advance. Instead, when an emergency cost presents itself it may be that the loans we are discussing here today, are a useful resource to consider. For those of us who prefer to repay borrowing by way of monthly instalments, the newest addition to short term borrowing is likely a good choice. Instalment loans are quickly becoming the preferred choice because of their flexibility in terms of repayment. Whereas for many years a loan of this nature meant agreeing to repay the amount due as a one-off repayment, nowadays lenders have more flexible and therefore customer friendly options available. Instalment loans come in a variety of different term terms, allowing borrowing over anything from 2 months up to 12 months in some cases. This means we have the ability to better plan for the cost of repayment for such loans, should the resource be needed for an unexpected cost.

 It would seem that as a collective we are becoming increasingly drawn to borrowing which allows a number of repayments to be made, instead of a single and sizable repayment. Whether this be via a credit card, store card or these short term loans as discussed here today, the option to repay in smaller and therefore more manageable ‘chucks’ seems to be key. Like with any form of borrowing however, it is important when considering short term loans that we do so with our own individual circumstances in mind. This means reviewing the options available in a sensible manner and then making an informed borrowing decision.

Short term loans and how they are offered to customers

When applying for short term loans nowadays consumers will notice that the range of repayment options on offer is much more flexible than that of the offering of years gone by. Today the short term loans market is somewhat transformed compared to the original manner in which these loans were due for repayment. For many years the short term loans market was awash with a very specific type of borrowing; designed in the first instance to introduce consumers to a simple method for borrowing a small sum of money. Given the reality that before short term loans were available online, consumers had very limited options concerning small time borrowing, it was important that the introduction product to such borrowing was clear to follow and easy to understand. Ultimately the end result was that of the payday loan. The payday loan existed very successfully for many years and was used by many millions of consumers. The key problem with the payday loan was the simple fact that consumers outgrew the simplicity of the repayment structure on offer. Increasingly consumers in a general sense became adapted to credit, large or small in scale, being part of ‘every day’ life and as such wanted to have access to flexibility in the process. This flexibility is what the payday loan sorely lacked.

As consumers continued to accept and make use of all different forms of credit, monthly instalment repayments became increasingly popular. Thanks to the like of home lending, mail orders and credit cards, consumer spending habits evolved to be reflective of these new resources. Instead of saving month in and month out for the goods and services desired, the modern day consumer has become used to being able to access these things and then make monthly repayments towards them until repaid. When the payday loan was made available over a decade ago, access to credit in a general sense was not as vast and as such consumers had the means and capabilities to make lump sum repayments; as demanded by the payday loan. The payday loan was, as the name suggests, a resource which let customers borrow an agreed amount of money until their pay day. This meant agreeing to repay the total amount borrowed and the interest charged by the lender within a short period of time. Although at the time this resource was fitting of the needs of consumers, in today’s economy it has been demonstrated that this is no longer the case.

In order to continue to provide a consumer friendly and financially useful resource, the short term loans market has had to evolve and this means changing the manner in which repayments are requested. Nowadays the payday loan has, in the vast majority of cases, been completely replaced by instalment based borrowing. This simple but fundamental change within the sector has meant that once again short term loans are able to provide a flexible and useful consumer borrowing resource; capable of catering to the modern day needs of consumers.

Repayments back to direct payday lenders is always important

I can never stress at just how important it is for people to repay their debts once they borrowed it. Missing loan repayments for any person will nearly always result in severe negative consequences for anyone involved and this is something most people will always be keen to avoid. It certainly does not matter whether short term loans or borrowed from direct payday lenders or whether instalment loans are taken out from high street lenders, the debts must be repaid as agreed. Credit cards, mail orders the ways to borrow money can seem endless but they must all be repaid. There can be things that can occur when repayments are not made and these are explained in more detail below.

When repayments are missed to direct payday lenders that person who is behind will be chased for this debt. The lender will have the right to frequently attempt to contact that person to pursue the money that is owed. They will have then the access to contact that person on all the numbers they have available for that person. This will most likely be the home number, the mobile as well as the work number. For most people being contacted for a debt when someone is clearly struggling financially can be tough and at times it can also be embarrassing. If someone is contacted on the home and work numbers also it could lead to a third party finding out about the debt which can result in further embarrassment.

If a repayment is missed to any lender then that person could have their credit file negatively affected. This can lead to that person in the future finding it harder to get finance approved. Or even when they are accepted it can often be very expensive and it can cost more than it would do for the average or decent borrower. Direct payday lenders have the right when repayments are missed to report the fact to various credit reference agencies so other lenders can see what has happened. They will do this when a debt has been overdue for a certain period of time of normally over a month. This will then in turn make it harder for that person to get finance and their credit score will then be lowered.

When any account is overdue the balance will increase and their can often be interest and charges added by the lender accordingly. This can lead to the balance increasing at a rapid rate which again can be stressful to any borrower. That borrower at some stage may then be in a position to repay this debt but because it has increased so much they can only do so at a more expensive rate. In some cases they may not now be able to repay the loan because it is too expensive. Some direct payday lenders can only offer expensive borrowing products and these charge high interest on any amount borrowed. When they are overdue they can then be really tough to repay.

Quick cash loans

 There can always come a time when a person needs money and most likely this can be down to so many different reasons. There can be some people for instance who may just need a small amount of money, they could just need some extra cash just to help make their salary last until they are next paid from their employer or they could just need some financial assistance to pay a bill perhaps. There can then be others who may need large cash loans as they are looking to make some form of expensive purchase. This could possibly be for a new car perhaps or maybe someone is looking to put money towards home improvements etc. Now regardless of what anyone ever needs money for, if they have this saved away they can then look to use this as required to then pay for whatever they need. Some people may then have enough saved to pay for their requirement and need outright or at least they can put money towards what they want. Turning to savings is always nice when this is a valid option however it is not always available and if this is then the case then people may need to then borrow the money.

When it does come eventually time for someone to borrow money and most people at some stage in their lives will have to do this there can be a high number of different options. Cash loans for example are just one way of borrowing money. This is mostly done through people taking out short term loans through payday lenders. This amounts to people borrowing usually up to £500.00 but sometimes more for people to then repay back the debt over a repayment term that suits them. This is a common way to borrow money for a wide range of different customers. These quick cash loans are designed to help people as the name would suggest over short time frames. Never should they therefore ever be used as a long term borrowing solution. People here usually take out the loans for amounts from £100.00 up to £500.00 or as mentioned before people can sometimes borrow more but this will be on the lenders discretion.

When most people so aim to borrow loans the chances are they will want their cash quickly. The chances are any borrower will want to have their loan disposable as soon as possible so they can put it to use and for what they want. Here cash loans and other short term loans can help. People can often look to apply for these online or over the phone in a quick and simple process that should only take minutes to then complete. If that same application is then approved from the lender that person can often look to receive the loan that very same day. In fact in some cases people can look to receive the loan within just minutes after they have been approved. People can honestly get cash that quickly through payday lenders when it is needed. The speed in which loans like this can be funded is probably the best thing as to what they offer.

Payday loan lenders and the products they now offer

When it comes to payday loan lenders and the product they offer, many of us still believe the options are limited. The reality is however that a lot of change has taken place over the last couple of years and today the loans and lenders who offer them are a completely different resource to what was once offered. Nowadays payday loan lenders operate to offer flexibility and choice to customers who are looking to borrow a small sum of money. It would be true to say that for a long time the offerings of this online market were limited and as such really only ever allowed a very specific type of borrowing, which is where in fact, the common belief of inflexibility stems from. Thankfully changes to the regulating body responsible for payday loan lenders and continued poor customer satisfaction has meant that the whole market and its lenders has had to transform in order to survive. Today we will be looking at these lenders and the product they now offer, to understand better what has really changed.

As many of us will be aware the original product offering from these lenders was the classic payday loan. Payday loans allowed customers to borrow until the date on which their next pay date fell. This meant usually borrowing for only a few weeks but at the most a month; depending on exactly when the application was submitted. As such the payday loan was a resource which saw consumers borrow small sums of money and if approved, repay the loan and the interest charged by the lender within a short period of time and as a lump sum repayment. Although simple in their approach and easy to understand, what was clear is that for many the payday loan and the repayments they required was for many not an ideally suited way of borrowing.

In order to better meet the needs of customer’s payday loan lenders needed to introduce a new way of lending which was not so restricted and furthermore, allowed more manageable repayments to be made. This fact was truly highlighted when the new governing body; the Financial Conduct Authority, took over responsibility for the market as a whole a few years ago. Through extensive research of how lenders once operated the FCA was able to identify where improvements needed to be made and how the payday loan lenders could improve what they did on a fundamental level. The result of this was instalment based borrowing. Instalment loans now all but replace the old style of borrowing and in doing so offer customers better ways of borrowing small sums of money. Instalment loans mean that customers have a better ability to repay the small sums borrowed because the repayments can be spread over a number of pre-agreed months. Depending on the lender and the specifics of what they offer, this could mean repayments over 3, 5 or 6 months for example.