To reiterate a theme that we have previously written about here at CashCompare, a short-term loan is not, in and of itself, entirely a risky proposition, nor something that will solve all your financial problems. Instead, much depends on how such a loan is used, and how it fits in with the broader scheme of how you manage your money.
So, with all that in mind, here are some of the steps you can take to reduce the degree of risk a short-term loan might present to you.
Borrow as little money as you can
This might seem obvious to some of our blog readers, but it is worth re-emphasising nonetheless: a short term loan is definitely not the kind of thing where you should borrow more money than you strictly need, just because you theoretically can borrow that much money.
After all, all funds that you borrow will need to be repaid. And with short-term loans potentially having APR rates of as much as 1,500% or more, it can be a seriously risky course of action to take out a loan for anything more than you need. This rate is a representative example; actual rates may vary depending on the lender and your circumstances.
As part of this, you should do everything you can to exhaust other financial avenues before you depend on a loan. Are there, for example, any inessential possessions of yours that could be sold to raise funds? Perhaps there are friends or family members who you could borrow money from, or maybe you could cut out certain things from your life – such as paid streaming subscriptions, a daily coffee, or going out to the pub or bar every Saturday – to help you find that vital cash?
Never commit to a loan that you know you won’t be able to pay back
This really is one of the ultimate rules of borrowing, that should be set out in bold red text: do not, ever, take out a loan if you are already aware you won’t be able to repay it.
If you do commit to such a loan and inevitably find yourself in trouble later, you will be in a much worse financial position than the one you are in right now. So, applying for a short-term loan out of desperation isn’t going to be a course of action that will serve you well.
Even if your situation genuinely seems desperate and you have investigated all other options you can think of, it would be a much better idea for you to seek help from a non-profit debt counselling agency, such as StepChange or National Debtline.
Of course, “life happens”, and you might be confident that you can repay a loan at the time you commit to it, only for a later change of circumstances to affect your ability to keep on top of your borrowing. But even if that happens, you should contact the lender immediately, so that you can agree on a feasible way for you to complete your repayments.
Compare loans online with the help of a reputable comparison website
When it comes to the world of short-term loans, there are direct lenders, but there are also credit brokers, and it is important to be aware of the distinction between the two.
As the term suggests, a direct lender is exactly that – a lender. They may be able to present you with a short-term loan option, but if they are the only lender you have approached, you will have little way of knowing whether an alternative lender out there could give you a better loan deal with a more competitive interest rate. That is unless, of course, you approach lenders individually, one by one.
But why should you do that, when you can instead go to one place? This is where the right credit broker can come in. Here at CashCompare, we are a credit broker and comparison site that maintains relationships with a range of leading lenders.
You apply through us, using a single no-obligation loan request form, and we will then get to work on sifting through the available loan products from our featured lenders. This process will make it easier for you to find and commit to a loan that represents the lowest possible risk to you.
So, if you are looking to compare loans online, why do it the slower, more laborious, and potentially riskier way? Our quote request form takes just two minutes to complete and submit, and you will be under no obligation to accept any loan we present to you through this process – a further step that will help minimise your risk.
Please note that loan approval is not guaranteed and depends on individual circumstances and the lender’s criteria.
We advocate responsible borrowing and advise all our readers to consider their financial situation carefully before taking out a loan.
"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.