Short term loans and how they work
Short term loans are a form of borrowing which is different to the traditional bank loan, for a number of different reasons. Today we will look to establish what the main differences are between large scale borrowing and small scale borrowing and what this means for consumers. One of the most important considerations when thinking about any form of borrowing is whether or not the resource is able to meet your individual needs. In order to establish if the right type of loan for your needs has been selected, a good starting point is understanding what type of loan is affordable and to do this why not complete a budget. A budget will allow you to understand exactly what you have coming in and going out each month and furthermore, what amount for a new loan based commitment would be realistically affordable. This is a useful exercise regardless of whether you need a large scale borrowing resource or are simply considering short term loans. In instances where a new loan agreement is entered into and correct consideration to the implied costs has not been completed, this will likely only lead to financial difficulty at some point or another and therefore is best avoided.
In simple terms short term loans are designed to assist in times when only a small cost needs your attention whereas large scale loans are best suited to bigger financial concerns, which may require a number of years for repayment to be made. So examples for short term loans will include unplanned and unexpected costs such as car repairs, vet bills and broken appliances. On the other hand, larger scale loans may be used for big purchases, such as a new car, a family holiday or a home improvement for example. When comparing these two borrowing resources they are actually very different in size, capabilities and design and therefore do not aim to serve the same consumer profile. Make sure when considering these two options that this fundamental and key difference is in the front of your mind and therefore considered fully before a new loan is obtained.
In terms of short term loans the majority of lenders will offer borrowing choices for loans which range in value from £50.00 to £500.00 and subsequently have repayment terms which start at as little as a single month and then can be extended at the point of the loan being agreed up to a 6 month repayment period. Large scale borrowing such as a Bank Loan, Hire Purchase Agreement or even a Credit Card can often offer values up into the tens of thousands and as such have repayment terms designed to be repaid over a number of pre-agreed years. With this in mind it is likely that the process of approval for short term loans and larger scale loans will be different also. This means that where short term loans can be applied for and potentially approved via the completion of an online application, this may not be the case for larger scale borrowing tools.