Things To Consider Before Taking Out A Short Term Loan

As we go through life, we are going to be hit with a number of unexpected surprises, some of which will affect our bank balance. In the past, we were told that the common route was to pay for everything out of our own pocket and try to avoid taking any credit or loans to support you during the difficult times.

However, times have changed and short term loans are one of many forms of credit for people experiencing an emergency situation. For example if your car suddenly breaks down or your boiler stops working unexpectedly and you find yourself with no options to pay for the outgoings, a short term loan can be one way to keep you on top of your temporary money shortfall.

It is always advised that when taking out a short term loan you take out only what you need and think realistically about whether you can afford the repayments or not.

You should have a clear understanding of the monthly repayment amounts and the total you will be paying back on your loan before you apply. We have created an online loan calculator to help you see repayments and the total you will pay back based on the amount you want to borrow. You can view the Wizzcash loan calculator on our home page.

However, when taking out a short term loan, there are few other things you must consider:

Interest rates

Always consider the interest rates of your loan. You need to have a firm understanding as to what you are paying back so you are not faced with any surprises when it comes to the repayment. All different short-term loan companies will offer different interest rates. We offer a respective 1265% APR and we show that to you clearly and simply, which is what you should see when taking out a short term loan. So, no matter which lender you use, always double check the given information. Any FCA regulated lender will have a cap of 0.8% daily interest so make sure that you only borrow from a regulated lender.

Length of the Loan

When taking out a loan, you will always know how long the loan repayment will be. It should be discussed and agreed upon before taking out the loan. Think sensibly about the term (or length) of the loan and about how soon you can afford to pay it back – the earlier the better. Some lenders, like Wizzcash, will let you pay back your loan before the agreed time without a fee. By paying back a loan sooner than later, could be a way of reduce the total amount of interest you pay back of a loan. Of course, this will depend on your personal circumstances.

Reasons For The Loan

Ask yourself why you need this loan? Can you live without it or do you really need it? Never take out a short-term loan for any unnecessary spending. Short term loans are designed to help you with emergency expenses, so spending them frivolously might result in some unnecessary debt. We understand that, at times, life can get rather difficult and towards the latter stages of the month you might not have money to spare for a one off financial emergency, so a short term loan is there to help you make your way until pay day. For additional information, check out this infographic which will advise you on how to use a loan wisely.

Consider the alternatives

Most payday loans have a high interest rates, and can be an expensive way to borrow money. It is important not to become dependant on high interest forms of credit, as this can lead to even more financial difficulties. So you may want to consider cheaper alternative ways to borrow money. These can include:

  • Credit unions loans
  • Bank loans
  • Low interest or interest free overdraft
  • Borrow from a friend
  • Borrow from a family
  • University loans

For more information on these, please see our page “Alternative to Payday Loans

Generic advice is not a service regulated by the Financial Conduct Authority.