The Different TypesOF

Short Term Loans

In more recent times the resources available have been somewhat divided in terms of the product

fundamentals. Changes to the regulating body mean that today lenders tend to offer more flexible

repayment choices, as well as staying true to their original product.

The end result is that consumers now have a choice between the classic payday loan as well as the newer

instalment loan. Depending upon the needs of the individual there is likely to be a loan which can support

these, thanks to the combination of payday and instalment based borrowing.

Today we will be investigating these two different types of short term loans and as such, looking to understand how these

resources exactly work.

The first point to make clear is that payday loans and instalment loans are both simply different type of

short term loans and as such are both regulated by the same governing body. The organisation in

question is the Financial Conduct Authority, also known as the FCA.

Short term loans can be defined as short term and high cost borrowing given the fundamental nature of the product being

offered. The difference between the payday loan and the instalment loan lies in the term of repayment for which the loan is agreed. Short term loans generally range in value between £50.00 and £500.00. Some lenders will consider higher loan

values, extending up to as much as £1000.00 but these higher loan values are usually dependent upon specific criteria.

All applications for such borrowing regardless of

the nature of the repayment take place via the means of an online based application form.

These forms are designed to be very clear and

therefore easy to follow and as such usually take

little longer than 10 minutes to complete.

The difference between products in terms of short term loans comes from the variance in repayment terms on offer. Firstly the

classic payday loan, which many of us will already have knowledge of. The payday loan allows applicants the ability to borrow until their next employment pay date. On this date the payday loan deems that the money borrowed and the interest chargeable for the period, be repaid as a single repayment on

this date.

Depending upon the loan amount borrowed, this style of borrowing can mean quite a sizable

repayment. Whereas for many years the payday loan existed as the only type of short

term loans available, the limited nature of repayment term meant that for some, the resource was not realistically affordable.

As such, payday loans are often better suited to customers who usually have the means to repay a sizable lump sum but for

whatever reason need to borrow money on a short term basis. Take for examples a consumer who usually have about £400.00

disposable income, after all normal bills and expenses have been paid. An unexpected cost results in a requirement for a short term loan; say for example a broken washing machine

with a replacement value of £200.00.

So as to avoid having no disposable income for the remaining month, the customer decides to borrow via

the means of a payday loan. It is likely that in such instances the repayment amount would be in the

region of £260.00 (for purely representational purposes) and therefore the customer could budget to repay the amount on their next employment pay date

accordingly.

The instalment loan variety of short term loans entered the market in more recent times and as

such is considered the newer of the two loan types. The reality is however that the product

itself; being small loans over ‘short’ repayment periods is very much the same.

The difference comes in the terms of repayment being offered. Until a payday loan which deems that a

lump sum repayment must be made to satisfy the loan, instalment based loans are more flexible in

nature. This means that repayments can be spread over a number of pre-agreed monthly repayments.

Nowadays the terms of repayment available are good, meaning consumers have choice at their disposal.

Depending on the lender this could mean repayments over 3 months or 5 months or even 6 months for

example. By selecting instalment based borrowing consumers have the ability to repay their short term

loans in smaller and therefore more manageable repayment amounts.

Using the same example as above, instead of having to

repay in a single and one-off style of repayment, the

consumer looking to borrow £200.00 for

their broken washing machine could spread the cost over a number

of months instead.

Source• Address: 1 Forbes Business Centre, Kempson Way, Bury St. Edmunds, IP32

7AR, UK.• TEL: 01284 724651

• EMAIL: info@fidelityworks.co.uk• Website: www.lendplus.co.uk