What are Short-term Loans?
These are generally cash advances provided by a lender to a borrower. Generally, such loans are taken out online over a short-term basis which can be for a lending period of a few days up to 12 months.
The Type of Loans Available:
- Payday – These are taken out over a period of no more than 2 months with 1 scheduled repayment. They are referred to as Payday loans as they are generally paid back to the lender on the borrowers Payday. These types of short term loans generated lots of bad press over the last few years due to many Loan companies lending irresponsibly. Luckily for everyone the industry has since been cleaned up and only those who are lending responsibly to people who can afford to repay their loan have managed to gain permission from the Financial Conduct Authority (FCA) regulator to remain lending.
- Instalment – Fast Loan UK are proud to be one of the pioneers of the online short term instalment loan. These are generally lent over a period of 3-12 month with set monthly repayments. We are proud to be able to offer one of the most flexible instalment loans on the market. Customers of ours can choose to make weekly, fortnightly and monthly repayments based on their unique set of circumstances. Our repayments are also flexible and are not set in stone. Customers will never be charged for missing payments and all of our customers get assigned independent Customer care managers who will assist them in working out suitable loans based on their own specific set of requirements
Short term loans are now subject to an industry wide interest rate cap. The maximum daily interest rate is 0.8% a day, and the borrower of a short term loan will never pay back more in interest than 100% of the initial loan value.
Where many of the most prominent lending brands opt to charging this maximum daily interest charge, our average daily interest rate is a great deal lower than this:
Representative Example: Amount of credit: £400 for 31 days. One total repayment of £466.43 Interest: £66.43. Interest rate: 195.28% pa (fixed). 509% APR Representative.
Why are these types of loans expensive?
Because of the high risk nature of this type of lending borrowers will generally pay a higher rate of interest than they would with a convention long term loan. This is because short term loans are a form of unsecured borrowing. This means the lender has no security against the loan itself. Therefore, if a borrower decided not to pay the loan back, then the lender could not simply take possession of the borrower’s home or property in return. Lenders therefore charge higher interest rates to their customers due to the increased exposure to risk of non-payment and bad debt.
We mitigate against this risk by carrying out credit and affordability assessments. We also build strong bonds with our customers and friendly relationships. This is why our lending is generally cheaper than many of our competitors. If you require more information on borrowing or expert advice, please contact the independent moneyadviceservice.org.uk.
Is the type of borrowing for me?
When taking out a loan like this it’s important to think carefully about your circumstances and whether you can afford the repayments. You need to ask yourself whether borrowing the money is going to help plug a hole in your immediate financial situation, without causing you more trouble down the line. There is no point in prolonging long term financial problems with loans of this nature, as it could just make the problem worse later on down the line.
If you think you are experiencing financial issues and struggling to pay your bills and manage your debt. We would advise you seek free and independent advice from debt charities. We have provided a list of our most recommended free debt charities. A list of these can be found here.