It is easy to think that fast loans or short term loans are a bad thing to get because we often hear in the press about how expensive they are. However, if you compare them to some other types of lending, you will see that they may not be as bad as they seem. In this article they are compared to overdrafts.
A fats loan is a short term loan. They are available from specialist lenders and they tend to be available to everyone, including those with poor credit records. They can be arranged very quickly as there is no credit check and therefore are often used in an emergency by borrowers who cannot get alternative loans. Borrowers tend to be offered fairly small amounts of money and pay it back in a short time.
Representative Example: £400 borrowed for 90 days. Total amount repayable is £561.92 in 3 monthly instalments of £187.31. Interest charged is £161.92, interest rate 161.9% (variable). Representative 305.9% APR. We are a broker not a lender. We don't charge fees. We don't sell your personal information.
An overdraft is often offered together with a current account. The amount offered will depend on the bank and the credit rating of the customer. You will be able to borrow up to the limit that they offer and you will be charged interest and possibly a fee as well. If you borrow more than you are offered you will be charged a higher fee. You can repay whenever you like but as soon as money goes into the current account it will automatically be used to pay off the debt.
There are big differences between the types of loans and it is worth noting them so that you can decide whether one or the other will be better for your needs.
The cost of the two types of loans will vary depending on the lender. It is therefore always worth trying to find the cheapest lender if you can. For the overdraft, you will probably find a comparison website might allow you to compare different banks and with fast loans you can go to Omacl where you will be able to compare lenders and see which is the cheapest.
All loans are more expensive if you borrow the money for longer. With a short term loan, you will have a repayment plan and will have to pay by a certain date. With an overdraft there is no repayment plan and so the loan can last a long time and therefore could more costly in real terms, even if the interest rate is lower. It is also worth noting that if you have an unauthorised overdraft costs are higher and they can have an equivalent interest rate (taking fees and charges into account as well) which is higher than a short term loan.
You will only be able to get an overdraft if your bank offers you one. You may want to try different banks to see if you can get one, but if you have a poor credit record then you could find that you will not be offered an overdraft with any account. However, a fast loan will be available for everyone because they do no credit check and this means that they are available for almost everyone. They tend to have a few rules, such as only lending to over 18’s and those that have an income but this means that most people that apply will get a loan.
The repayment terms on a short term loan will mean that you have to either pay it back in a lump sum when you next get paid or in some instalments. You will have to keep making repayments until it is all repaid and you will not be able to borrow more money online until it is repaid. With an overdraft any money that you put into your current account will be used to repay the debt until it is all paid off. This means that you will not know, for sure, when it will all be paid off and therefore you could have the loan hanging round for a while. It does help a lot to know when the loan will have to be repaid as it encourages you to repay it earlier and therefore save money. If you find borrowing stressful, having it paid off more quickly will also help you to get rid of that stress more quickly.