How do Short Term Loans Work?

How do Short Term Loans Work?

There are many people that might not be that familiar with how short term loans work. This is because they are relatively new onto the market and they are not something that is offered by traditional lenders such as high street banks or online lenders like Cobra Payday Loans. It is therefore the case that you might want to find out a lot more about them before you decide whether to take one out. This is a really good idea as you should know what you are getting yourself in to. You also should know about all types of loans because if you need to borrow money you want to choose from all of your options so that you know that you have picked the one that is the very best for you. So, knowing a bit more about short-term loans could be very useful.

How to apply?

So the first thing you may wonder about is how you apply for these loans. As they are not available from mainstream lenders then you will have to find them elsewhere. The easiest place to find them is on a website. You can search for short-term lenders on a search engines and you will be able to find a lot of them. Once you have a lender you will find that it is straight forward to apply. You will often have a choice of being able to apply online or on the telephone. There is a very unlikely to be any manual form filling which will be a relief for many people. If you phone then someone else will fill in all of the details for you and you will just have to verbally answer their questions. It is likely that you will need to send them some documents though, but these can normally be photographed or scanned and emailed to them, so it is really easy.

Who can apply?

Often with a loan, there are restrictions on who will be given one. Although anyone can apply, there will be some applicants that will be turned down. In the case of a payday loan, this will be limited to very few people. There are just a few restrictions. The borrowers have to be over the age of 18, live in the UK, have a UK bank account and a regular income. That is all they have to do and therefore most people will be allowed to borrow money. With mainstream or traditional loans, there are often other restrictions as well. Often the applicant has to have a decent credit record. This means that they have to be able to prove that they can be trusted with a loan and that they will repay it. However, a short-term lender does not do this sort of credit check. This is because these loans came about specifically to help those people that were unable to borrow money from anywhere else. It was noticed that those people might often need money in an emergency and they had nowhere to go for help which is why short-term loans started up. Therefore, they do not look at credit score as a criteria when deciding who to lend money to.

How much can you borrow?

The short-term lenders will not normally lend that much money. As they are often lending to people who have a poor credit record, they do not want to give them so much money that they will never be able to repay. Therefore, they often tend to lend between £10 and £1000. This is useful if people want to borrow for emergencies such as replacing a broken white good or paying an unexpected bill or even buying some food when you have no money left at the end of the month.

There may be other restrictions on how much you can borrow though. It is often the case that lender will only lend a larger amount to someone who has lent form them before. This is because they want to build up some trust with you first and make sure that you are going to be reliable, They will lend you a small amount and if you show that you can repay that, then they will lend you more. How much this is will vary between lenders and so you will need to check and find out whether the lender that you are thinking of using will be happy to lend you the amount of money that you want to borrow.

How do you repay?

It is really important to find out more about repaying, because not all loans are the same. Many short-term loans need a one off, lump sum repayment. This means that the borrower will need to repay everything they borrowed plus the interest all in one go. This is quite different to traditional loans where you repay in instalments This can have advantages though as it means that you will be able to repay the loan more quickly and get rid of it sooner. Some people really do not like being in debt and the idea that they can get rid of the loan and then be free of it really quickly can be really appealing. However, it is really important to make sure that you have enough money to be able to repay it. This is something that it is well worth researching.

Can Short Term Loans Provide me with Enough Money?

There are lots of questions that you might have when you are looking into whether you should get a short term loan. One of these might be whether the loan will be able to provide you with enough money. It is a good idea to investigate this quite thoroughly as you will need to think about whether the loan is going to work for you. There are a series of steps you could take as part of this investigation.

How much do I need to borrow?

It is really important to make sure that you really carefully calculate how much money you need to borrow. It can be surprisingly easy to do this wring. If you have a bill, for example, that you need to pay, you may just think that you need to borrow that amount and perhaps a little extra just in case, However, you should look into things more carefully.

Firstly, do some simple calculations. Work out how much the item is that you need to pay for. That should be easy. But then you need to work out whether you can afford to pay something towards it and this is trickier. You need to look at how much money you have and what you need to spend it on. Look through you bank statement and perhaps previous ones as well to predict what you will ned to buy for the rest of the month. It might be that you will be able to manage without spending anything or that you will need to buy a few things. Try to be as accurate as possible and you will be able to see whether you will be able to use some or all of the money that you have at the moment. This should give you an accurate amount that you will need to borrow.

It can very often be tempting to borrow a little bit extra just in case or to treat yourself. If you do your calculations properly, you should not need to borrow anything extra just in case. However, treating yourself is a trickier idea. You might feel that you deserve to have a little bit extra and therefore you want to treat yourself. You need to try not to do this though. It is important to remember that you will have to pay for any money that you have borrowed. This means that you could end up spending a lot of money for just a little thing. Think about what you are using the money for and how much extra it will cost you because of the cost of the loan and then decide whether you still think that it is a good idea to borrow a bit extra.

How much will the lender give?

You also need to do some research to fid out how much you will be able to borrow. A short-term lender will tend to lend a lot less than a high street bank. If you only need a small amount then this could be fine, but it obvious depends on how much you need. You will also find that the lenders will differ in how much they will lend. There are many that will lend between £100 and £1000 but not all of them will, so you will need to find out. If you need more than £1000 you may still find that there are a few lenders that will let you have this but you will need to do some research to find out.

How much will the lender give to me?

It is also worth noting that just because a lender will lend up to a certain amount of money, it does not mean that they will lend that much to you. This is because they will be cautious. They do not formal credit check and do not use anything as collateral which means that they have no guarantee that they will get their money back. This means that they need another way to build up trust with you. They might decide that for first time borrowers, they will only lend them a small amount of money. Then if they can pay it back in full and on time, they will be prepared to lend more. Therefore, if you need a larger amount of money it may be difficult to get it. These rules will vary between lenders though and the amount of money that they are prepared to lend to first time borrowers will vary as well so you will need to investigate different lenders and compare them to fid out for sure.

So, until you do some investigations you will not really know whether a short-term lender will be able to lend you enough money. There are quite a few factors that could determine the answer, so you will need to do some research to find out.