With many different types of short-term loans it can be rather confusing to know what is the difference and what is available to you. There are many types of loans generally and this means that you could find the whole thing rather confusing. Unless you have borrowed a lot before or you have studied personal finance then it is unlikely that you will be familiar with all of the different loan types. With short-term loans being fairly new, it is even less likely that you may know all about them. It is a good idea to have an idea what short-term loans there are and to know a bit more about them as you will then be able to decide whether they might be suitable for you or not. Even if you do not have an immediate need for a loan, it is always good to know what is available so that you can use it if you have a need in the future.
A payday loan is probably the most well-known short-term loan. This is because it tends to be the most advertised and has been around the most. This means that you may already know a bit about it. The loans came about when it was noticed that those people who had a poor credit record were just unable to borrow money from anywhere. They decided that they would help them and set up pay day loans. These therefore did not worry about a person’s credit record. They were also designed to help out in emergencies and this meant that the money could be accessed really quickly. This means that there are some lenders that are available to get borrowers money evenings and weekends and therefore this can provide for them even if their emergency is outside of normal business hours. They will also be able to get the money to the borrower the same day and possibly within a few hours. This means that they really will be able to provide emergency money to most people. There are very few limitations on who can borrow but borrowers do need to be UK residents over the age of 18 who have a bank account and a regular income.
An instalment loan is very similar to a payday loan apart from the way that it is repaid. Payday loans are repaid in full on the next payday of the borrower. This can be great for those that can afford to do this and afford all of their other expenses but for some people this can be a struggle. The instalment loan should help because it will enable you to repay across a series of months. This can help to make it much easier to manage the repayments. These will be a bit more expensive because the loan lasts for longer and so the interest will be higher. However, if it means that things are much easier for you, it could be well worth paying that extra. Also, if you do not make the repayment on a loan you will get extra charges and so taking out a loan that you are confident that you will be able to repay could be a better decision with less risk attached.
Guarantor loans work a bit differently. They allow borrowers to have a lot more money. With a payday loan it is likely that you will only be able to borrow up to £1,000 and in many cases less than that. However, it is very possible that people will want more money than that. The guarantor loan can provide this as it offers thousands of pounds, repayable in instalment still with no need for a good credit record. However, the big difference with this one is that you have to find a guarantor, who is a person that is willing to make the repayments if you are not able to. You will therefore need to find someone, who has a good credit record, that is willing to do this for you. Some people may know plenty of possible candidates and others may not.
These are just some of the loan types available. Lenders will vary in what they offer and their specific terms will also vary. This means that it is always important to find out exactly what is being offered so that you know what you are signing up for. The above descriptions are general and there may be differences between those and what you are actually offered by a specific lender. If you are not really sure what they are offering then it is wise to contact them and ask questions. Trying to understand using the terms and conditions can be really hard and you are likely to miss things as there is so much information to plough through, so much better to contact them and ask specific questions about what is being offered, how much they charge, what the repayment terms are and things like that.