There are lots of different types of loans and if you are looking for one it can be really helpful to understand the differences between them. You may also have heard that one type of loan is better than another and that might be something that you want to use when you are judging which one is the best. It is good idea to know more about them so you can decide for yourself.
Main Features of Short-term Loans
Short-term loans have several different features that are quite different to long term loans. Their main features include the fact that they do not last long; hence the name. You would normally need to repay them within a few months at the longest and possibly even with a few weeks or days. They are mainly designed to give you some money to tie you over until you next get paid. This means that you will be required to repay them on the day you get paid or perhaps across your next couple of pay days.
These loans also do not require you to have a good credit record. It means that anyone who struggles to get a loan from a traditional lender due to their credit record not being that good, will find that they can have a loan like this.
Short-term loans tend to lend small amounts of money. This can be just up to £1,000. This can be helpful if you do not want to get into debt for too much money.
Lastly, they can be very quick to arrange. You might be able to get the money that you need within a few hours of applying. This will depend on the lender but it is very useful to know that you will be able to get the money quickly if you need it.
Main features of long-term loans
A long term loan is usually issued by a popular high street lender or building society. It tends to be for a reasonably large amount of money and some loans will have a specific purpose such as a mortgage.
The lenders will do a credit check which means that they will only lend money to those that they feel are capable of repaying the loan. They will look at potential borrower’s credit history to find out whether they feel that they are safe to lend to and will not take on big risks.
There are different types of loans, some will require monthly repayments over a fixed time. Others might have less of a restrictive repayment scheme where you can opt to just repay a minimum amount. The loans tend to last for some time, which could take years or even decades to repay, although there are some that will take less.
Which Is Better?
Deciding which is better will not be as easy as it seems. This is because you can only decide this when you know what situation you are in when you want to borrow. It will depend on how much money you need to borrow, how long you want to borrow it for and what you can afford to repay.
You will therefore need to make this assessment when you know what your precise needs are. It is not always that simple either.
If you have a poor credit score, then it might be that a short-term loan will be your only option. If you need money quickly, then again, you might find that the short-term loan will get it to you faster. You will also need to think about how much money you need and which type of loan will be able to provide you with that.
A really important thing to consider is repaying the loan. If you are loan with a repayment, which ever type of loan you pick, you will be charged some fees. This means that you need to make sure that you are confident that you will be able to repay it. You want to make sure that you have enough money to cover that repayment and that you will also have to cover anything else that you also need to repay. The way repayments work will differ between different loans and so it is important to get an understanding of this, so that you can make the right decision for you.
The cost of the loan is also a big factor. It is good to find out how much the loan will cost you and then think about whether you think that is good value for money. Compare to other loans and lenders and you will be able to decide which is the best. It is a good idea to make sure that you do not just concentrate on cost as it could be that you will be better to pay a little more but get a loan that is easier to repay.
It can actually be quite complex to work all of this out. However, it is well worth thinking about all the factors of the loan and what will suit you the best. This will not only mean that you will avoid paying out more than necessary, but you should find that you will have a much better borrowing experience and will find the loan easier to repay and the lender better to deal with as a result.