Short term loans have become the best solution for financial emergencies to many UK residents. Many people do not want to worry about monthly payments for many years. Because of this, they would most likely prefer taking a loan that they can pay back in a few months. Aside from allowing a borrower to be debt-free after a few months to one year, there are other reasons why UK citizens prefer to take short term loans.
Borrowers Can Get the Funds Quickly
Taking a short term credit could mean approval of application and release of funds on the same day. Such speedy processing is not possible when you apply for a loan that is payable for many years. Because the amount is usually more than what one can borrow short term, lenders make sure that the borrower can afford to pay them back. Lending companies would typically conduct a background and credit check before approving your loan application, which could take a day or longer. They would grant the loan once the results of the history and credit check indicate that you are trustworthy. Credit checks could take time and delay the approval of your loan.
Borrowers Do Not Need Collateral
When you apply for a long term loan, the lender would usually require collateral such as your car or your house. If you do not own anything of value, you might not be able to borrow money. Why put up your property as collateral when you can apply for a one that does not require you to offer security? Applying for short term credit is a good option. Because the amount that you borrow is payable in a short time, lenders find it unnecessary to ask a borrower for collateral. A person that does not have a property to offer as security can still get cash for his dire needs.
Borrowers Do Not Have to Worry about Debt for a Long Time
Thinking where to get the money for your next payment schedule can be stressful. When you see yourself worrying about the same thing monthly for two years or five years can be frustrating unless your financial status has changed for the better. However, there are financial institutions that would not allow you to pay back your debt in full before the end of the term. If you do, they will penalize you. With a short term loan, you can repay the lender anytime you have the money to pay for your remaining balance.
Borrowers Can Use the Funds from Short Term Loan for Any Thing
Many traditional lenders ask why you need to borrow. Other lending companies would have specific purposes. Banks offer a housing loan, which is specifically for the purchase or renovation of a house. Small business loans would be for starting a business. In contrast, a borrower may opt for a multipurpose loan for education, medical bills, or business. With a short term loan, lenders do not ask why you need to borrow money. Although a lender might discourage you from using the funds for trivial things, they would still let you spend the money any way you want.
Borrowers Can Enjoy Low-cost Credit
A loan has a corresponding cost in terms of interest rate and other charges. Taking a 5-month loan could cost less than a five-year loan. You might think that the interest is not much because you pay small amounts every month. Nevertheless, if you compute all the money you paid for interest rate, you would realize how much of your payments have gone to the interest alone.
Because of the above-mentioned reasons, most people in the UK that needs quick cash prefer to take a short term loan.