Applying for a loan is extremely easy these days, thanks to the internet. Many companies, ourselves included are giving loan offerings that are available at the click of a button, providing you meet the necessary requirements of course.
That said, there are so many loan options available, that sometimes the convenience of the internet does have a downside. This is the fact that you cannot speak to someone face to face should you have queries about the various loan products on offer. Now although we encourage you to contact us in this situation, many people don’t and for that reason, we make sure that we aim to educate through our website as well and not just offer loan products to the public of the United Kingdom.
If you are better informed, you will end up making a better decision when it comes to choosing the right loan product for your unique situation. Rest assured however, should we think that you have most definitely picked the wrong loan product or if we can suggest one that is a far better prospect, we will contact you and help you make a proper informed decision.
One of the first mistakes people often make when applying for a loan is opting for the wrong term lengths. In their simplest form, loans are broken down into either a short term or a long term product. Let’s take a look at the major differences when it comes to these two types of loans.
Loans taken out over a short term
Well, it’s not that hard to work out how these loans operate. Here, you will be given a sum of money, usually not too big an amount which then needs to be paid back over varying terms, depending on the agreement between yourself and the lender.
These terms can be anything from a week to a month to even 12 months. Generally however, they are never beyond 12 months. So when do people apply for short term loans? Well, normally these are used in the case of an emergency and the loanee has no other place to turn to secure some money, for instance, an emergency medical procedure, home repairs, car repairs (if they haven’t got insurance) or perhaps even a payment to their children’s school for an extra-curricular activity.
The great thing about a short term loan is the turnaround time. Once you have applied and accepted to receive a loan, it takes around twenty-four hours before the money is paid into your bank account. Examples of a short term loan include the payday loan. Here, a loan amount is taken out and repaid as soon as the loanee receives their monthly paycheck. Note that short term loans often receive some criticism because of their relatively high annual percentage rate.
Loans taken out over a long term
It goes without saying that a long term loan’s instalments are paid over an extended period of time, generally from over twelve months and up to thirty years! The most obvious example of a long-term loan would be a house mortgage from a high-street bank but many of the public in the United Kingdom don’t know about the other products that are on offer.
These loans are generally taken out because a large amount of money is needed. This could be for a building project, redecorating a home, used for a business and many more reasons. One major difference here however, is the need for some form of collateral, especially if you suffer from a low credit rating. If you do suffer from a poor credit rating, you will probably be rejected as well, especially when applying at a bank.
This collateral offers security to your lender. Should you miss instalments or refuse to pay at some point down the line, they can recoup their costs by claiming and selling whatever it is that you put up for security.
Unlike short term loans, when you apply for one of these loan types, expect there to be numerous forms to fill in as well as a waiting period before you hear if you have been accepted, especially when applying through high street banks. There are long term loan products that we offer however, that have the convenience of a twenty-four hour turnaround time. These are called logbook loans and here, your vehicle is used as collateral.
So in a nutshell, a short term loan is far easier to get if you have a bad credit rating and is the preferred option if you need money in a hurry. A long term loan can be paid back over a long period, allows you to get far more money but is not for people with a bad credit rating (unless you choose a logbook loan).