As we know, life is unpredictable and so too are our finances. Thankfully, there are different options available, which are designed to make life a little easier when money suddenly gets tight. Short-term credit is just one of these options, and it can be a great way to bridge the gap between paydays or provide support during an emergency or an unexpected expense.

What is short term credit?

Short term credit is a form of credit that’s usually payable within a 12 month period. There are different types of short term credit facilities which are suitable for various purposes so it’s important to explore each of these options to ensure you are selecting the product that works best for your specific circumstances.

Payday Loans

Payday loans are usually unsecured loans which are payable within a 30 day period. Most payday loans are intended to tide you over between paydays – hence the name – and can be used to cover unexpected costs that you wouldn’t otherwise be able to meet with your monthly salary or savings alone. Given their high interest rate, these loans are typically quite small – starting from around £100 and going up to around £1,000 – though this may vary depending on the provider.

Short Term Loans

Short term loans are typically small loans that are repaid in instalments over a period longer than 30 days and less than 12 months. They’re generally used to cover larger unexpected expenses as the repayment of the loan plus the interest doesn’t need to be made in one go. Interest rates can be fixed or variable depending on the provider.

When should I use short term credit?

There are a number of situations that may result in you considering the use of short term credit and it can be incredibly helpful when you don’t already have funds at your immediate disposal.

An Emergency

It’s a well-known phenomenon that boilers always seem to break down during the coldest time of the year and whilst you might want to hold off on calling out an engineer, your frozen fingers and toes certainly won’t want you to! It’s an unfortunate but common experience for many of us, and a perfect example of the sort of emergency that is likely to pop up at the worst time. A short term loan or payday loan would quickly cover the cost of such an emergency, alleviating you of the stress of worrying about how to get it sorted.

An Unexpected Expense

An unexpected expense, like a parking ticket or a fine, can pop up from anywhere and at any time, making a peaceful day suddenly very stressful. Whilst unexpected expenses aren’t always necessarily a serious emergency, you’ll want to get it out of the way before it becomes a serious problem. Often the cost of a parking ticket is reduced by half if you pay immediately. Online loans such as payday or instalment loans can be incredibly useful in such instances, with a straightforward application process and funds deposited in your account within minutes if you are approved.

A Shortfall in Wages

Colds, flu, injuries – it happens. For many of us, depending on your line of work, taking time away from work due to sickness, accidents or emergencies that were outside of your control can mean a smaller pay check at the end of the month. Receiving less pay than you were expecting can be a bit of a blow and with financial responsibilities to cater to, you may need a helping hand which is when a short term loan could come in handy. If you’re unsure about how long you’ll need to be away from work and feel it may be for a longer period than planned, it could be worth looking into other longer term options before taking a short term loan.

A Change of Job

Getting a new job is almost always good news but managing your finances in the days leading up to the start of a new job can be difficult, especially if you were out of work prior to starting. A short term loan could help to cover work clothes, travel and food costs during the first month of work until your first payday when things will hopefully have settled.

Man filling in a form

Where can I apply for short term credit?

Most short term credit facilities are available online. The application process is often quick and straightforward, though the process may vary from provider to provider. A credit check is normally required, as this, along with the information that you provide in your application, helps the lender assess if the credit product is suitable for you. A quick search for short term credit would return results of different types of credit facilities that may be suitable for you.

Can short term credit affect my credit score?

As with any form of credit, like a credit card or a mortgage, it’s important to make repayments on time. It looks good on your credit file as it tells potential lenders that you’re a responsible borrower and can contribute to a higher credit score overall.

Whilst short term loans, like any other forms of credit can affect your credit score, it’s worth noting that your credit score relies on a number of factors and not just on your repayments. However of course, it’s always best to avoid late payments and defaults from being recorded on your file if you can.

If you find that you’re struggling to make your payments on time, contact your provider as soon as possible as they’ll want to help you get your debt settled in way that you can afford.

Is short term credit right for me?

It’s important to feel and be in control of your finances as much as possible but we know that things don’t always go to plan. Though short term loans can be useful when needed, it is never advisable to become dependent on them, especially if your financial situation doesn’t seem to be improving. As always, spend some time assessing your circumstances before deciding to take on another financial responsibility. Maybe you simply need to review your income and expenses and explore other ways of improving your situation before taking on a new loan. Or perhaps you have a little savings pot you can dip into to cover a non-urgent expense, or you can budget in time to make the payments.

Most importantly, do you need to borrow money and can you afford the repayments? Asking yourself both of these questions before you take on any form of credit is vital in helping you make an informed decision with a view of securing a better financial outcome for yourself in the future.