Short Term Loans vs Payday Loans

Short term loans vs payday loans – there are a lot of choices out there for you if you want to borrow money and pay it back quickly. The main difference between short term loans and payday loans is usually the number of repayments you make. In general terms, you usually pay back a payday loan about a month or two after you take out the money – in lump payments. With short term credit, you could pay your loan back from two to twelve months. However, this is not always the case and there is a lot of overlap between the two products nowadays.

So, what is right for you? Here is our guide to what you can expect from short term loans and payday loans.

Short Term Loans vs Payday Loans – Differences in Application Process

If you are looking to take our a payday or short term loan, the application process is really similar. They will want you to answer a few short questions about yourself. In general, what they are looking for is that:

  • You are 18 years or older
  • You are a UK resident
  • You have a British bank account and/or you have a debit card from which they can take your repayments
  • You have got a job and you are earning £500 a month or more
  • You have a mobile phone they can contact you on

Lenders will also need some idea of what your monthly expenses are. With that information, they will be able to work out whether you can make the repayments on the due dates.

Will a lender contact my boss to check where I work? In many cases, no. They will use third party companies to check who your employer is and that you are on the payroll. Some may wish to contact your boss though. If that is something you do not want, ask them about their policy on this before you apply.

Will You Wait Longer For a Short Term Loan to Reach Your Account?

Payday and short term loans are designed to cover your emergencies. If you find yourself taking out short term loan after short term loan, it is best to seek advice because that is not what short term loans are designed for.

Who do most people take out short term loans or payday loans? Everyone’s reason is their own but mainly it is when you do not have spare cash to cover:

  • Your car breaking down when you need it for work
  • Something going wrong in your house which needs fixing straight away
  • Your wages if your employer does not pay you on time
  • A gap when you are moving jobs
  • Medical expenses
  • Funeral expenses

Lenders know you need the money in a hurry and, when they have approved your loan, your money can be in your bank account within the hour. Please be aware though that some short term loan providers and payday loan companies may need additional information before they can make a decision, so, it is always best to make yourself easily contactable and available if they want to get in touch to complete your loan application. If you have bad credit and are applying for a loan, you may need to provide additional information concerning your current circumstance.

Short Term Loans vs Payday Loans – Which is more expensive?

Under the law, short term loan providers and payday loan companies are not allows to charge you any more than £24 for every £100 you borrow for 30 days. With some lenders, you will pay that amount of interest. With others, it will be less.

On top of that, lenders are also not allows to charge interest and fees that total more than the loan you took out. So, if you borrow £100, you will never pay back more than £200 in total, no matter how many months you take the short term loan out over.

Most lenders change interest on a daily basis. That is important if you want to pay your loan back early. We will cover that in just a minute.

Conclusion

Short term loans and payday loans offer flexibility and speed. They are great for emergencies and, depending on your lender, you could even save yourself money by paying the loan back early. You also don’t have to secure any collateral against them like your home or your car.