How does a Short Term Loan Work?
Long term loans like mortgages and car finance are intended to be repaid over the period of years, as it just isn’t feasible for you to repay them in one go, or even over the course of a few months.
Short term loans are almost always lower amounts, and are paid back over a shorter period. It really is that simple. They’re much more manageable, and you can usually get a loan decision the same day you apply. You’d typically receive the funds much faster than a long term loan too - at PiggyBank we aim to pay out all approved applications within 1 hour.
PiggyBank short term loans are flexible - you can borrow from £100 to £1000, and choose to pay it back from 7 days to 5 months. We also have the options of paying back weekly, fortnightly or four-weekly. If you pay back early, you can also save money on interest.
Why Might You Need A Short Term Loan?
Short term loans are intended for smaller emergency expenses - you’ll usually need the cash as quickly as possible.
Fixing your car should it break down can be expensive, and you’ll often need it to get to work. Most people won’t have the funds to spare for such an expense, so short term credit can be an option.
Similarly, if an essential appliance like your fridge stops working, you’ll need to replace it straight away. If you just wanted a newer model, there might have been an option to save up the money, but in that sort of situation, you’ve got no warning so you might need to take out a short term loan.
It’s important to note that short term loans shouldn’t be used to pay your other creditors, as this can mean that you are entering into a debt spiral, and responsible lenders like PiggyBank won’t lend to you. You also shouldn’t take out short term credit for long term issues like unemployment, as you have no way of knowing whether you’ll be able to pay the money back. If you think that you need to speak to someone about your debts or finances, you can contact the Citizens Advice Bureau for help and advice. They can also refer you to third parties who will offer more specialist advice.
What’s the Difference Between an Instalment and Payday Loan?
A payday loan is paid off in one lump sum, usually on your payday. A short term instalment loan allows you to spread your payments over a longer period, typically over a few weeks or months. An instalment loan can be better if you are looking to borrow a larger amount, which could be difficult to pay back all at once.
With a PiggyBank payday loan, you can borrow between £100 and £400, over 7 to 35 days. We charge the same rate of interest for both instalment and payday loans - 0.8% per day. So if you borrow £100, the interest is £0.80 a day. Because interest is applied daily, if you pay your loan back early, you’ll save money on interest.
A PiggyBank instalment loan allows you to borrow £150 to £1000, though if you’re a returning customer, you may be able to borrow up to £1500. You can repay over 2 to 5 months, and if you repay an instalment early, or make any partial payments along the way, you can save money on interest. Unlike with some loans, we won’t charge you for making early repayments.
What are the Benefits of a Short Term Loan?
For those who often don’t have access to more traditional means of credit, such as a bank loan or a credit card, short term loans can be an ideal solution. Unexpected costs often cost more than you may have budgeted for, or you may have several expenses at once that you thought would be more spread out.
Short term loans, whether they are instalment or payday loans, are usually for emergency expenses, so you’ll need the money as soon as possible. Our online application process is short and simple, and we try to give you a loan decision as quickly as we can. If your loan is approved, we aim to transfer the funds within an hour.
An advantage of a short term loan is that they can often be cheaper than other types of short term credit solutions. Credit cards for those with bad credit often charge far more in interest and fees, and overdraft fees with your bank can be incredibly expensive.
If you feel you have bad credit, taking out credit and paying it back early or on time can help rebuild your credit score. PiggyBank won’t charge you any fees for repaying early, and we offer lots of payment options.
Which Lender Should I Choose?
Short term loan lenders need to make you aware that they are direct lenders not brokers. Direct lenders like PiggyBank will pay funds out directly, and will not charge any fees for paying out a loan. Some brokers charge a referral fee, for passing on your details to a direct lender.
If the short term loan lender you borrow from is UK based, they must be authorised by the Financial Conduct Authority (FCA). The FCA make sure that direct lenders act fairly and lend responsibly. All lenders also have to let you know how much the loan will cost and the dates you are due to make your repayments.
Some short term loans require you to have a guarantor - often a family member or friend. The guarantor will make a payment if the borrower is unable to. You don’t need a guarantor for a PiggyBank loan, so there’s no hassle of finding someone who can back you financially.
A good way of finding the right lender for you is looking at the feedback they have received from other customers. If you were looking into a new mobile phone, you’d probably see what other people are saying about each make and model - the same principle applies for loans. You can also look on comparison sites, like money.co.uk to see what each lender offers.
Can You Apply For A Short Term Loan With Bad Credit?
You may have bad credit if in the past you missed or made late payments on loans, credit cards or your bills. Sometimes if these are unpaid for a while, you could even be taken to court and a County Court Judgement (CCJ) could be taken out against you. A late payment or CCJ could look bad if you’re applying for credit, even if it was years ago.
You might also find it more difficult to obtain credit if you have what is referred to as a ‘thin credit file’. This means that you haven’t taken out much, or any, credit previously, so there isn’t much on your credit file for lenders to look at. They may be taking a risk in lending to you, as they don’t know how you handle credit.
If you’re not sure what sort of credit history you have, you can look at your credit score for free through companies like Noddle. The higher your credit score the better. If you’ve got good credit, you may be able to apply for bank loan or credit card should an unexpected expense crop up. These can be options for people with bad credit too, though more conventional lenders may charge you higher interest rates as there may be more of a risk when in comes to repayment. It’s important to note that with a bank cash loan, you’re not likely to get an instant payout. Some banks can take up to 3 days to transfer the funds, which can be frustrating in an emergency. If you’re looking for same day loans, short term lenders like PiggyBank should be able to help - we aim to transfer the funds directly within an hour of approval.
If it turns out you do have bad credit, short term loans may be a good option for you. Lenders can’t guarantee 100% approval rates, but having a poor credit history doesn’t necessarily mean that you’re unable to take out further credit. Not all lenders expect you to have perfect credit - lenders like PiggyBank won’t just look at your credit file, we’ll also look at things like your employment information and your income and expenditure. We understand that your credit history could be just that - history. Your credit file has information from the last 6 years, so missed or late payments are often from years ago. We’ll look at more recent credit you’ve taken out and repaid.
Taking out a short term loan can also help you improve your credit score, as if you make your repayments early or on time, you’d be showing that you can repay credit and handle your money well.
How Do I Apply?
Once you know how much you need to borrow, and the dates you’re able to make payments, just move the sliders to see how much your repayments would be. Our application form is simple and completely online. Once you’ve filled this in, we will go through credit and affordability checks, and our Underwriting Team may ask a few more questions. We make sure we are lending responsibly, and you can afford to make the repayments.
Once a loan has been approved, we aim to pay the funds directly within an hour. If you have any questions along the way, it’s easy to get in touch.
What Happens if You Can’t Make a Payment?
At PiggyBank, we understand that there can be unforeseen circumstances that mean you can’t make the payments you agreed to, and it can be easier to bury your head in the sand. We know that it can be hard to talk about these issues, but want to reassure you that we are always here to help, and will have a suitable option for you.
Other Things to Consider:
The most important thing to think about before taking out a short term loan is whether borrowing is the right thing for you. It can be better to save up money and wait to buy things that are not essential. If you’re borrowing to pay for other credit commitments, you could be in a debt cycle, and taking out short term loans may not be a good idea. If you are worried about debts, you can get free impartial advice from companies like Step Change