Are Long Term Loans Less Effective Than Short Term Loans for Bad Credit?
Whenever you initiate for borrowing, the bad credit score often appears as the barrier. Crossing this barrier seems a tough challenge because most of traditional lenders deny lending to poor credit borrowers. The concerns for mountings debts in the UK are being raised with more power from more platforms. Worried lenders have already put the brakes on borrowing binge. The news in last of 2017 is about the less saving by the consumers and more dependence on borrowing. People in lower or middle income group heavily rely on short-term loans granted by direct online loan stores. As the bad credit is a fast spreading problem, the UK borrower prefers to deal with only the lenders dealing in short term loans for bad credit.
Short-Term and Long-Term Loans – The Difference:
As the terms denote, short-term loans are administered for a short period that may be one month or up to 12 months. Long-term loans are sanctioned even for the 5 years period. In both the cases, the repayment is often made through monthly instant loans. Besides the difference in repayment period, both the terms loans have other differences also that you should knew to choose the best one:
Short-term personal loans:
- Small amount
- Short repayment period
- Higher interest rate
- Mainly available for individuals rather than businesses
- Almost less process
- Quick same day approval
- Secured and unsecured both; in most cases, people apply for unsecured short-term personal loan
- Bad credit is acceptable
Long -term personal loans:
- High Amount
- Tax Benefits under IT Act
- Low Interest Rate
- Available for businesses
- Needs documentation
- Secured by Collateral
- Long term small amount installments
- Credit score matters
When Should You Approach Direct Lender?
The availability is no more a concern because of growing presence of lenders but the cost matters because the successful repayment depends upon several factors like amount, income, steadiness in monthly income, interest rate etc. Most of the personal loans are connected with borrower’s bank account to make the repayment automated. Short-term loans are offered at higher interest rate than the long-term loans but still some circumstances make the small loans a better choice:
- You need small amount loan
- You can pay back entire loan amount plus interest amount within 12 months
- You have poor credit score
- You don’t have anyone as a guarantor
- You don’t see it feasible to mortgage your asset for small amount loan
- You can’t get cash help from traditional financial institutions
- You can’t withdraw cash from credit card
How To Plan, Get and Use The Short-Term Personal Loan The Best:
A common myth is that short-term loans trap you in the “cycle of debts”. The fact is that the short-term personal loans, if used responsibly for a justified reason, provide much-needed financial help to manage unexpected situations. The numbers of households feel helpless in paying the monthly bills at the end of month; if they don’t pay the bills before the scheduled date, these bills may reflect on credit report to bring down the credit score down further.
The payday loan may be an alternative but the high APR and single installment repayment within 28 days or on coming salary date don’t make this option a good choice unless all the doors for installments based borrowing are closed.
Homework, homework and homework is success mantra to get reasonably priced bad credit short-term personal loan for an online direct lender. Write down the requirements and justify the need with perspective of cost, hurdles and affect on credit report. If it seems necessary, approach only FCA regulated lenders dealing in no credit check or bad credit lending. Minimise the required amount and settle a comfortable repayment period; never compromise with repayment period that doesn’t suit to your paying capability. Penalty free early payment is a good option even if you choose the longer than sufficient repayment period.
Compare and negotiate at your best taking the advantage of competition in the UK lending marketplace. If you need financial help at a cost; the lender too need a client to earn. Knowing the options always helps to get better deal for short term loans for bad credit irrespective to required amount.