Do you want to borrow between £100 and £1,000? Don't like the idea of borrowing money and having to pay it back all in one go? Then, in some circumstances, you may wish to consider an online bad credit short-term loan.
It happens to us all. No matter how much we plan our finances, we get hit with an unexpected or emergency bill which you just haven't had the chance to put money aside for. It could be that we need to pay the vet or your car's playing up and you need it for work and to take the kids to school.
So, what do you need to know about bad credit short term loans?
Short term loans are a type of financial product offering borrowers between either £100 and £1,000 or £1,001 and £5,000.
For loans of under £1,000, borrowers can repay their loan over a period of three, six, or twelve months. On loans of £1,000 or more, a borrower can repay over a period of between three months and three years.
Many providers of short term loans are able to work with people whose credit history is not perfect.
All Financial Conduct Authority (FCA)-authorised and regulated lenders must carry out a hard credit search when a borrower completes a full application for finance.
Although what's on your credit report is important, it's not the only factor that finance companies consider when they're making their decision on lending to you. They take into account what your finances are like now by including an affordability assessment on their application form.
With a short-term loan, you pay the loan back over a period of up to a year in monthly instalments (sometimes called repayments). After your lender has collected the funds from your bank account for the final instalment, your account is closed and the loan is fully repaid.
Payday loans (sometimes called pay loans) are different. You agree how much you're going to borrow from your lender. Then, either within thirty-five days or on the day you're next paid your wages, you pay all that money back in one go plus the interest on top.
However, having just one repayment puts a lot of borrowers off from applying.
Why? Before you take out any loan, you should feel confident and comfortable that you'll be able to meet each repayment you've agreed to make without causing any further hardship to you or your family.
This is why many borrowers, when they need money, choose short-term loans instead. The monthly repayments are lower meaning that, in many cases, a short-term loan is more affordable. However, it's important that you're aware that you pay more interest on a short-term loan, so it is more expensive in the long run.
One question borrowers look for help on is "how do I get a short term loan?".
You can either apply for a short-term loan direct to a lender or via a broker. What's the difference between the two?
Applying direct to a lender for their short term loans is simple. There are over 80 companies authorised and regulated by the FCA in the market and, for most of them, all you have to do is to visit their website to fill in their application form.
When you apply to a direct lender, you're only applying for their short term loans - your choice of loan is limited to that finance company only. When you complete their application form, they then run a hard credit search on you.
This makes shopping around difficult. That's because the more hard credit searches are run on you, the more a finance company might think you're desperate for money and this actually discourages them from lending to you.
Why apply through a broker instead? The process of applying might take you two or three more minutes but there are certain advantages to borrowers.
Brokers have a panel of direct lenders they work with. When you submit your application for a short term loan via a broker, they whittle down the lenders to the ones more likely to say "yes" to you.
In turn, each of the selected lenders runs a soft credit check on you - unlike with hard credit checks, other finance companies can't see soft searches on your file.
When the first finance company replies indicating that your loan application might be accepted, you'll be redirected to their website.
When you're there, you’ll need to complete their application form in full. When you submit your answers, they'll then run a hard credit search on you. After the credit search has been run, the lender come back with their answer.
By working with a broker, only one hard credit search will be carried out and that's only if you proceed to make a full application with the lender whose website you're sent to. That's despite the fact that your request for money may be considered by multiple lenders.
Applying with a broker means that there will not be excessive searches on your credit file and also means that overall your chances of successfully applying for a short-term loan are better - because of the smart technology that matches lenders with borrowers. It is important to note though that sometimes a broker may not be able to find a finance company for a particular applicant.
Applying for a short term loan is quick and easy - lenders and brokers know that borrowers need the money in a hurry to help them out with their emergency financial situation.
Simply answer each question you're presented with. The details they'll want to know include:
To beeligible for short term loans, you need to:
It's so that they have an account they can pay your loan into and from which they can collect your repayments.
Interest rates on short term loans are subject to customers' personal circumstances.
If your application is approved, the interest rate you're offered will reflect the level of risk a lender thinks there is that you might not be able to pay back your loan. Finance companies assess the level of risk through an affordability assessment (which forms part of your application form) and the information contained about you on your credit report.
The interest rate you pay on these financial products also reflects the costs incurred by lenders when some of their borrowers actually do default on their loans
As a result, the interest rate you’re offered is likely to be significantly higher than you might be offered by a bank, for example.
By law, each lender must show you the representative APR on a loan. The representative APR is the rate that a lender offers 51% of more of their customers.
Representative APRs reflect the cost of a loan in interest, fees, and charges over the course of a year. That's why the interest rates look so high on many short term loans lasting less than twelve months.
For example, if you borrow money at 133.1% per annum fixed for a period of nine months, the APR is actually 535%. In almost all cases with short-term loans lasting less than 12 months, the APR is a lot higher than the actual interest rate.
For borrowers, we understand it can be quite confusing. For more information, click here for Investopedia’s guide on the subject.
You should only take out a short-term loan if you can comfortably afford to meet all the repayments on the date due and if you know where the money is going to come from.
If your application is accepted either by one of the finance companies directly or by a broker you're working with, your lender may be able to transfer the money into your bank account within minutes* of you accepting the loan.
Most short term loan providers collect repayments from your bank account once a month. Some lenders offer the option to pay weekly or fortnightly.
Please do not apply for a loan if you doubt that you are able to pay it back. If you default on a short term loan or you cannot pay it back, then the chances of being accepted for any other type of finance in the next few years will be greatly reduced.
Short term loans aren't your only option. You should only ever consider borrowing money when you can't find the money that you need from another source and when you're sure that you can afford each repayment in full and on time. Please take note of what is in the "warning late repayment" part of this page, as defaulting on a loan can have consequences for your future borrowing.
You may want to ask your friends and family if they can help you out financially to get you over the unexpected bill or emergency financial situation you're in. It may also be worth considering whether the situation you're in is actually an emergency - could you wait to have done what you need doing until your next pay day?
I am worried about my current level of debt
If you're currently in debt and you're concerned about how manageable the debt is that you're in, you may wish to consider contacting one of the following organisations for free help, guidance, and support - StepChange, PayPlan, National Debtline, the Debt Advice Foundation, the Money Advice Service, and Citizens Advice.
Finding the right lender for you
5.4m Brits (nofollow) use short term lending every year to help them out of financial tight spots. When choosing a lender or a broker, look for reviews online showing what their customers think of them.
To apply for a short-term loan through Little Loans, please click here.
Representative Example: Amount of credit: £1200 for 18 months at £90.46 per month. Total amount repayable of £1628.28. Interest: £428.28. Interest rate: 49.9% pa (variable). 49.9% APR Representative. We’re a fully regulated and authorised credit broker and not a lender