When thinking about a personal loan, be aware that there a several options available.
Carefully think about why you need to borrow, the amount you need to borrow, the length you want to borrow over and importantly how much you can afford to pay back each month.
Typically a loan that is 12 months or less is usually classed as a short term loan. Loans longer than 12 months are usually classed as a long term loan.
We’ll go into more detail below so you can see which is best for you
So what is a short term loan?
With a short term loan you can usually borrow for up to a year.
There are various types of short term loans available, and they are usually paid pretty quickly as long as you pass all the lenders checks.
The lender will perform a credit check on yourself to see if they can lend to you.
The better your credit score the more options you will have. If your credit score is not so good, there are still lenders who will lend, however the rates may be higher.
What can short-term loans be used for?
If you are looking to take out a short term loan, this is usually to cover expenses or to get money quickly for a short period.
You may have had an unexpected bill for example a house or car repair and need the money right away to sort this.
Be aware that short term loans compared to standard loans may have a higher interest rate, but you will be able to get the money quick.
A popular short term loan is a payday loan, as the name suggests this is cover the gap until payday where you pay the lender back.
Although the interest rates on payday loans are slightly higher, if managed correctly and paid back on time, the high rates can be avoided.
When thinking about a payday loan, bear in mind that you only borrow what you actually need, and the amount borrowed is something you can pay back on the date agreed.
Make yourself fully aware of the interest rates and any fees.
With a huge amount of short term lenders to choose from, take your time and choose what’s best for you.
So what is a long-term loan?
A long term loan is a loan which is usually offered over more than 12 months and paid back by set payments each month.
Long term loans are available from banks and alternative lenders. There are a range of terms and interest rates available depending on your credit rating.
The better your credit score the better the overall interest rate will be.
You’ll need a job and regular income to apply for a long term loan.
This is where long term loans get quite interesting; you could borrow up to £40,000 or even more with some lenders. This would be on a unsecured basis.
Before deciding to apply or take a short term loan, make sure you do your research and see which the best deal is for you.
Different types of long term loans
Personal loans are available to people with various credit scores and can have flexible terms and repayment conditions. These conditions are based on your personal credit score.
Personal loans are provided from a large amount of lenders.
- Secured loans allow you to borrow against a property or asset. As you providing security you can usually borrow a higher amount of money over a longer period.
- You normally get better rates for a secured loan as well, as its less riskier for a lender.
- However as you are securing the loan against a property or asset, make sure that you can afford the repayments.
The conclusion. Short term loans to long term loans
Really it all comes down to the borrower’s needs and circumstances.
A short term loan is quick to apply for and you could have the money quick as well, so any unexpected costs can be covered right away.
There are also various options to choose from for all circumstances.
A long term loan again can be applied for quickly and allows you to borrow much more than a short term loan. If you decide to borrow an amount which is secured against your property or other asset, then make sure that the repayments can be made, as ultimately the lender has agreed to lend you this amount with an agreement in place that your property or asset would be sufficient to cover any short falls.