Quick fix loans – a viable alternative to long-term commitments

Finance provider SwiftMoney.com outlines the benefits of short-term loans.

Everyone faces money troubles at some point. Many of us are living on a tight budget and money doesn’t seem to go as far as it used to. If you haven’t got the luxury of a pot of savings to draw on if an unexpected expense crops up, you could find yourself in trouble.

You know the kind of thing – the cooker packs up, you need a train ticket to visit a sick relative or your growing children need new school shoes. Short-term payday loans, or cash advances, could be the answer.

Usually you can borrow any sum up to around £1,000 and the funds are transferred to your account overnight and sometimes in just a few hours. You pay back the loan when you receive your next pay cheque.

If you use them sensibly, short-term loans can be more effective and affordable than taking up an overdraft and its associated charges and can be more manageable than maxing out your credit card. Because they are only parting with their money for a limited period, most short term lenders don’t require you to put up any collateral or even ask for a credit check.

It’s true that falling behind with your repayments will impact on your credit score and that could make it more difficult if you went on to apply for a personal loan or a mortgage in the future. But if you choose a short-term loan you can afford, you could actually boost your credit rating by demonstrating your reliability.

Many people are drawn to the simplicity of a short term loan. There’s minimal paperwork – in fact you can apply for many payday loans online in just a few minutes. But quick does not mean slapdash. There are strict rules and regulations that payday lenders must adhere to and the fragile position of the sort term borrower means they need to be confident they are protected.

So if you’re under 18, unemployed or have an outstanding payday loan, your application may be refused. With a short-term loan you’re getting a quick fix financial boost to help you over a difficult bump, so you won’t be burdening yourself with a long term obligation that could keep you awake at night. But make sure your loan requirements fit the bill – fast money to cover unexpected costs rather than regular borrowing that might require a larger loan or even careful debt management.

The most obvious drawback with a short-term loan is the high rate of interest. But if you pay off the loan quickly, you could end up paying less interest in the long run than if you’d taken out a personal loan over a number of years.

Looking for finance? SmallBusiness.co.uk is working in partnership with trusted lenders to find the best business funding deals. Find out more here.

Ben Lobel

Ben Lobel

Ben Lobel was the editor of SmallBusiness.co.uk from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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