During an emergency, everyone leaps at short
term loans because these loans come with instant approval. However, these loans
are quite tricky for the reason of high interest rates. Anyone can apply for
these loans but interest rates vary from individual to individual depending on
credit score. The higher the score, the lower the interest rates will be. The
lower the score, the higher the interest rate will be.
There are several short-term loans on the market such as personal loans with no guarantor, cash loans, text loans, payday loan, and unemployed loans.
A brief on each type of short-term loans
Short-term loans come with small amount and therefore, they are more likely to get easily. This year take out the following loans to tide over your unexpected expenses.
Cash loans
Cash loans are the best loans if you want very small size of loan. The maximum limit of these loans may vary from £750 to £1000. It depends on the policy of a direct lender. Whether you need money to fill fuel in your car or you need it to pay your medical bill, you will get funds despite your poor credit score.
Text loans
You are in the restaurant and the bill is on your table. You have had your pocket picked. Do not panic; tug out your Smartphone and text the message to your lender. Your lender will assess your application in a couple of moments and disburse funds. These loans act as a shield to avoid embarrassment.
Personal loans with no guarantor
Personal loans allow you to take out a large amount of money. You can take out around £25,000. The best part of these loans is you do not have to pay your debt in one attempt. You will pay the loan in regular instalments and all of them will go to both capital and interest. These loans are unsecured loans therefore, they do not require collateral. You also do not need to arrange a guarantor.
Payday loans
Taking out payday loans is not a bad idea if
your credit history is good. However, you will end up with paying high interest
rates in case of deplorable credit score. Make sure that you can afford
repayment. These loans come with very short period, usually for two weeks. As
you receive your next pay cheque, the amount is automatically deducted.
Which
short-term loans should you avoid this year?
Just because short-term loans are approved instantly, does not mean that all of them are favourable to borrowers. You should avoid applying for these loans:
Cash advance
The money that you withdraw by using your credit card is known as cash advance. These loans are extremely expensive. You will pay fees along with interest. Note that interest rates are higher than other short-term loans and there is no grace period. Cash advance damages your credit score.
Secured short-term loans
If you want to take out funds more than the
maximum limit or you want to borrow at lower APR, your lender will ask you to
put a security against your loan. These loans are very risky because the lender
will liquidate your asset if you make any default.
Pros
and cons of short-term loans
Every coin has two aspects, similarly
short-term loans have both positives and negatives.
Pros:
- You can get these loans without further ado because of smaller size. A good credit score is not mandatory.
- The length and size of these loans is small, so you can get rid of them quickly.
- The total interest you pay on short-term loans is lower than long-term loans because of shorter repayment term.
- You can put in an application online. You do not need to dissipate your time in loan process. You will get the loan in minutes.
Cons:
- Although these loans come with
smaller amount, you may still feel burden because of repayment of the entire
debt in lump sum. You need to be careful of your paying capacity. Most of the
borrowers end up with rolling over the loan or taking out a new loan to pay the
earlier debt.
- Some
loan companies may disburse you funds at very high interest rates. Do research
extensively before you take out any loan from direct loan lender in UK.
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John Smith
February 28, 2019 at 6:48 am
Nice post