Life, it is fair to say, is all about perceptions – not all of which may be accurate, or even have a shred of truth to them at all. And yet, you might conceivably decide whether to apply for a short-term loan on the basis of those possibly mistaken beliefs.
So, at a time when more and more people might have reason to seriously contemplate taking out a short-term loan, we decided we would put the spotlight on just three of the most common misconceptions about them.
Myth #1: “short-term loans” are effectively just rebranded payday loans
This may be an understandable enough perception to have. After all, you might have wondered from time to time why there doesn’t seem to be as much aggressive marketing of payday loans as was once the case.
As we touched on in a recent article on this subject here at CashCompare, a factor in that situation could be the problematic image that payday loans have attracted in recent years. A lot of us are used by now to the notion that payday loans often aren’t worth the bother, given the gargantuan interest rates that they can often have, of as much as 1,500% APR or more.
But it is equally important to emphasise that the term “payday loans” and “short-term loans” are not entirely synonymous.
Although a payday loan could technically be considered a form of short-term loan, given that it is typically provided on the understanding of repayment happening when the borrower is next paid by their employer, the term “short-term loan” is broader than this. It refers to any kind of loan with a duration of up to 12 months or less.
Here at CashCompare, we don’t deal with payday loans, but we do work with lenders who offer other forms of short-term loan to borrowers. Such loans tend to have their repayments spread out over a longer time period than is typically the case with a payday loan, and they might represent a better match to your particular circumstances and needs.
"The lenders we work with offer varying APRs. Always check the representative APR and ensure it's acceptable and manageable for your situation."
"Always be aware that failing to meet repayments can lead to severe consequences, including further financial strain, additional fees, and potential damage to your credit score."
Myth #2: short-term loans are just for people in desperate need of money;
Possibly related to what we said above about how people can confuse payday loans with other types of short-term loan, there also seems to be a perception in some quarters that a person would only consider a short-term loan if they were extremely short of essential funds.
Yes, a given person might well apply for a short-term loan because they require a quick injection of cash for a crucial expense that just can’t wait until their next payday (such as having their car repaired if it breaks down). However, there are also other situations in which someone might think about submitting such an application through a broker like CashCompare. While short-term loans can provide temporary relief, they shouldn’t be seen as a long-term financial solution. Avoid becoming overly reliant on them.
Common examples include when the given person is attempting to fund a much-desired home improvement or even their dream wedding day.
Technically, they might not need to get married or to convert the loft, and they might be able to wait a little later to save up the extra money they require in order to make their dreams a reality. But others may decide that when they are just a few hundred or thousand pounds away from that point anyway, and they know they will be able to make the repayments easily, they might as well apply for a short-term loan to help realise what they’re aspiring to.
As always with situations like this, it depends on the particular circumstances of whoever might submit such a loan application. A short-term loan might be a good choice for some people, but not so much for others.
"Loans should be taken out responsibly and only when truly needed. Always evaluate whether the loan is essential or if there are other ways to manage your financial needs."
Myth #3: all short-term loan providers are as trustworthy (or untrustworthy) as each other
It’s something that we’re accustomed to hearing (or for that matter, saying) about politicians, and not in a complimentary way: “they’re all the same”. But whether you have a positive or negative attitude towards brokers and lenders of short-term loans, an important thing to appreciate is that they are definitely not “all the same”.
If you have applied for a short-term loan in the past, you might have been fortunate enough last time to find a great lender that offered the right loan with a reasonable interest rate… or you may have had a less-than-excellent experience.
Regardless, every time you apply for a short-term loan, you will be in a new situation. So, before you commit to taking out a particular loan with a specific lender, you should do your research into that company, and make sure you are comfortable with them before agreeing.
"Before committing to any loan, it's crucial that you carefully read and fully understand the terms and conditions. Understand your rights, as well as your responsibilities as a borrower."
In our capacity as a credit broker here at CashCompare, we work with a panel of reputable lenders to help make sure you only commit to a loan deal with a company that you can trust.
Our service is based on trying to match you with the right lender for your needs, and you will be able to check out any given lender’s reputation via sources like online reviews, before you go as far as taking out a loan with them.
"Rest assured, all the lenders we work with are authorized and regulated by the Financial Conduct Authority. We advocate for responsible lending and borrowing."
"As a credit broker, we are committed to transparency. We may receive a fee or commission from lenders, but our aim is always to find the best match for your needs."
"If you're unsure about the right financial product for you, consider seeking independent financial advice. There are many charitable organizations that offer free financial counseling and can guide you in making informed decisions."
So, are you ready to discover what could be possible for you when you apply for a short-term loan with our help? If your answer to that question is “yes”, please feel free to fill in and submit our no-obligation online form today.
"Warning: Late repayment can cause you serious money problems. Always consider if borrowing is the right option for you and ensure you can repay your loan." For help, go to moneyhelper.org.uk.