How do Short Term Loans Compare to Other Loans?
There are many different types of loans and when you want to borrow money you will need to examine different types of loans so that you know which will be the most suitable for the purpose that you have in mind. Most of us are fairly familiar with more traditional loans such as mortgages, personal loans, overdraft and credit cards but the newer loans such as short-term loans, are often not so well-known. It is good to understand the differences between the different types of loans so that we are aware of what we have to choose form when we are looking for a loan. It is so important to know what options are available and then we will be better able to make sure that we are picking the very best loan for us.
Short-term loans were set up to help people who could not get loans elsewhere. This means that they do not worry about your credit rating when they are lending. Although they do a credit check, they will still lend to people who have a poor credit rating. This is because they lend small amounts of money which they feel are easier for people to be able to repay.
Traditional loans will only be available to those with a good credit rating. They may even charge a higher interest rate to those that have a credit rating that is not that good, because of the risk of lending to then, but those with a really low rating they will not lend to. This means that for some people, these loans are the only type that they will be able to use.
Speed to arrange
Loans will vary in how long they take to arrange. With a short-term loan, they were designed to help people in emergencies. This means that they are set up really quickly. You will find that some lenders will be able to get the money transferred into your bank account in a few days and others will take a few hours. This means that you will need to check so that if you need the money really quickly you be sure to choose a lender that will provide that for you. With a more traditional loan, you will find that it will take significantly longer to get the money unless you already have a credit card or an arranged overdraft.
The repayment of some short-term loans is quite different to what you might be used to. The loans are sometimes set up so they have to be repaid in a lump sum. This means that you will have to find all of the money, both what you borrowed and the interest plus fees to repay in one go. This can be great for anyone who does not like to be in debt and hopes that they will be able to get their loans repaid really quickly. However, if you have borrowed a lot of money, it can make it more difficult to repay as you have to find such a lot of money in one go. Some short-term loans can be repaid in instalments though, so you need to think about this when you are choosing a loan.
Less well-known lenders
With a short-term loan it is much less likely that you will have heard of the lenders that you are picking from. Some people really like to use a lender that they know of and therefore this might eliminate this loan choice for them. However, it is worth remembering that because these types of loans are relatively new, it means that you will probably not have heard of the lenders or at least not many of them. However, if you do not know them this is not necessarily something that you should be worried about. This is because a less well-known lender will really need to make sure that they treat their customers well because they will be relying on them to either use them again or recommend them to others. You, therefore, might be surprised at how good they are.
These differences between short-term and traditional loans can be quite significant. They might be a big advantage to some borrowers but others may still prefer the more traditional methods. It is a good idea to be aware of how they work though as you never know when you might be in the situation where you need to pick a loan and these loans might be the best for you. If you suddenly find that your credit rating is not so good then these may be your only choice. If you need money extremely quickly, these could be extremely helpful to you. If you want a loan where you are forced to repay really quickly, then these could also be really useful for you.