The Choose Wisely guide to short term loans

The Choose Wisely guide to short term loans

What are short term loans?

Short term loans are designed for those looking to borrow money over a short period of time. Due to the nature of the product, short term loans do come with a warning. It's important to check that they're the best way for you to borrow, before you send off an application. This guide to short term loans is designed to ensure when considering a short term loan you choose wisely and find the best deal.

1: Compare short term loan options

It's often the case that those looking for a short term loan are doingso due to an unexpected cost arising, such as a boiler breakdown or car failure. In a state of emergency, it becomes even more important to compare your options. The last thing you want when money is tight is to be paying over the odds or even worse, be declined. You can compare your options in our short term loan comparison table.

2: Budget for your repayments

When considering a short-term loan it's extremely important to ensure you can afford the repayments before you apply. If you can't afford the repayments then don't apply as you will either be declined or end up with serious financial problems. By completing a simple household budget you will quickly get an idea of your incomings and outgoings and whether you can afford the repayments.

3: Understand the cost

The representative APR of short term loans is high but recent FCA regulation has capped the amount that lenders can charge. Interest is capped at 0.8% per day, and total interest and fees can not be more than 100% of the amount borrowed. eg. If you borrow £200 you will not pay more than £400.

4: Consider the alternatives

Taking out a loan should always be given careful consideration, even if it is for a small amount or over a short term. Borrowing money for a one-off cost such as emergency repairs or an unexpected bill is a solution, but if you’re considering a short-term loan to cover priority bills such as rent, mortgage or utility bills then you should always investigate other options first. Discuss alternative payment arrangements with your provider or speak to debt advice organisations for impartial debt help.

5: Beware unauthorised lenders

Any lender or broker that is not authorised by the Financial Conduct Authority (FCA) is acting illegally and is known as an unauthorised lender. If you borrow from such a source then you will not be covered by the Financial Ombudsman Service or Financial Services Compensation Scheme if things go wrong. Unauthorised lenders use cold calls and spam emails to target borrowers, particularly those who are vulnerable. Beware lenders who ask for application fees or upfront payments and, if you’re in any doubt, check the FCA as this lists authorised companies, persons, or products on its Financial Services Register. Choose Wisely is fully authorised and regulated by the Financial Conduct Authority. Our firm reference number is 730574 and you can see our listing on the FCA register by clicking here. We conduct regular due diligence on every provider who features on our website and we will only feature authorised firms on our comparison tables. Price comparison websites such as CompareTheMarket.com and MoneySupermarket uphold exactly the same standards.

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Written by Mark
Published on 5th July 2017
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