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Compare short term loans

Compare short term loans

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Last updated: 11 April 2022

A short-term loan can be a quick and effective injection of cash. Compare short-term loans with usave and check your eligibility in minutes, without affecting your credit rating.

What are short term loans?

Short-term loans are repaid over a maximum of one year – a repayment term much shorter than for traditional personal loans. Generally, they can offer relief when unexpected or unavoidable expenditures come up, like something going bust in your car. 

They're a short-term solution only - they should not be used as a long-term plan for borrowing money. Because they're shorter, you tend to get much higher interest rates, so even cheap short-term loans may cost you more than a long-term loan.

Check out our short-term vs long-term loans page for more info on how the two types of loans differ.

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How much do short-term loans cost?

As we mentioned, short-term loans often carry a higher APR, which is how much interest you would pay over a year. With longer-term loans, lenders are guaranteed to get a consistent monthly sum for an extended period, so APRs are generally lower as the lender will be able to take advantage of the compound interest they will receive over a greater period of time.

When you start to compare short-term loans, regardless of the loan term there will be an APR displayed. It can be a bit daunting trying to work out how much interest you will pay back over the course of the loan; to make life simpler for you, on usave we show how much you will have to pay back in total.

Example short term loan costs:

Loan amount Loan period APR Total to repay
£1,000 26 weeks 5% £1,014
£1,000 52 weeks 5% £1,027

Recent legislation was introduced by the Financial Conduct Authority to stop exorbitant interest rates. Previously, it was legal for people to ultimately pay back what they borrowed several times over when accounting for interest, which was particularly the case for payday loans. Now, the maximum amount you can be charged in interest equals the sum you borrowed. Still, not ideal if you're taking out a £1,000 loan!

How much can I borrow with a short term loan?

Sums tend to be much smaller with short-term loans – enough to tide you over. Remember as well that the longer you borrow, the more you pay back in total. You should be wary of short-term loans offering thousands; if you need to borrow within this region then look for long-term deals where cheap loans will be more abundant with better rates.

The amount that you will be able to borrow on a short-term loan will be largely reliant on your personal circumstances and credit rating.

What are flexible short-term loans?

For short-term borrowing it's possible to get flexible loans. One benefit of these is they allow early repayments without penalties, so you can be more flexible with managing your finances. Some also let you specifically choose how much you want your monthly repayments to be.

Conversely, long term loans – those lasting over a year – will have binding repayment plans. That means that should you want to pay off your loan prematurely, you'll be met with early repayment charges.

However, do be aware that with great flexibility comes great caveats: you'll likely get higher interest rates with flexible loans, so definitely weigh up the pros and cons.

What to consider before taking out a short term loan

Before you compare short term loans, be acquainted with other ways to borrow money. Loans always come with interest and you'll end up paying back more overall.

Depending on how much you need, see whether a (very supportive) friend or relative could help you out. You'll avoid paying interest so will save money in comparison to taking out a loan.

Have you got solid income and a good credit history? If so, credit cards are another great short-term way to get money. Most credit cards offer 0% APR for a set period of time – how long that is will depend on the provider. As a result, you can borrow on your credit card without paying interest. Be aware, though, that nothing lasts forever and after that enticing grace period is up, you'll be charged interest if you fail to balance your account monthly.

Consider overdrafts, too, which are also for smaller amounts - typically up to £2,000. You can check with your bank if you qualify. Whether or not you get a competitive interest rate compared to a loan depends on your bank, but you can pay your overdraft off in one fell swoop should you wish without incurring early exit fees. Subject to your circumstances, an overdraft could be the best way to borrow money.

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Danny Lord

Author: Danny Lord

Danny is our Editor-in-Chief, and has been writing news and guides for comparison sites for the last five years.

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