When you see the phrase ‘short-term loan’ you may wonder how short the term actually Is and how long the loan lasts for. Some people do not like the idea of being in debt and so having a loan that does not last long can be extremely appealing. This means that short-term loans could suit them really well, but how short is short-term?
How long is a short-term loan?
So a short-term loan will vary in length. The very shortest could last for just a few days and some may last for months. Short-term loans tend to be payday loans. These will allow you to borrow a sum of money until you next get paid. This means that they will not last longer than four weeks normally but could be very short, depending on how close to pay day you decide to take them out. There are some types of short-term loan that might take longer to repay though. It will very much depend on what type of short-term loan you take out.
Types of short-term loan?
A payday loans is probably the shortest term loan in this category. You will find that an instalment loan is similar but instead of repaying in a lump sum, you will repay in instalments over a series of months. Although the loan will still not last that long, it will be longer. You will find the repayments easier to manage or will be able to borrow more money if you use this type of loan as you will not have to repay so much money in one go. This can mean that this type of loan will be more preferable for some people.
You may also see guarantor loans being included in this category. These are repaid In instalments but you borrow much larger amounts and so they could take years to repay and so are not really that short-term at all.
Is short going to work for me?
It is worth thinking hard about whether a really short-term loan will be the right choice for you. It is great to think that your loan will be repaid really quickly and this is a great benefit. However, if you have to repay a lot of money in one go then you could find that it will be quite tricky to do this. You will need to make sure that you prepare carefully for it. You need to find exactly how much you will need to repay and then you will be able to work out whether you will be able to afford this amount. It will very much depend on how much you borrow and how much you get paid as to whether you can afford it, so it is a very personal thing. You will need to check how much the interest and fees will be as well, because you will need to repay those as well as the amount that you have borrowed.
As well as knowing exactly how much you will need to repay for this loan and working out if you will be able to afford to repay it, you also need to think about the other costs that you will also have to repay. You will have other bills, direct debits and standing orders to pay for as well as food and you will need to make sure that you have enough money to pay for all that as well.
This is the disadvantage of having a really short-term loan. So, although it is great that it will be repaid really quickly, it can be really hard to actually manage when you do so. It can therefore be worth considering whether it might be better to have something that you can repay over a longer period. Even repaying for just a few months could help and this means that it could be that an instalment loan will be better. It is likely that thus will be more expensive as you will owe the money for longer but it could be well worth it if it means that it will be a lot easier for you to repay.
Of course, you could also do other things to make the repayment easier to manage. For example, you could take on more work so that your pay is higher. You could compare loans and make sure that you have the cheapest possible one. You could see if you can reduce the cost of anything else you buy or buy less of it. You could even consider selling some things you own to raise some money to help to pay for the loan. There are lots of possibilities and it is a matter of finding something that you know will work well for you. So make sure that you are familiar with your household finances, work out what free time you have and then pick the right loan and do what you can to make sure you can confidently repay it.