Short-term lenders – also known as payday lenders – have received mixed reviews based on the experiences of those who’ve used them and are often criticized by those who never have. Whether they’re seen as bad or good isn’t quite the point though—it’s whether they can be useful or not that matters most, along with whether you can afford to pay them back. And in some circumstances, seeking out short term lenders to provide you with a loan – even one with higher interest rates – may indeed be your best bet. Here’s a look at just a few of them:
- Because you couldn’t get a bank loan – Traditional loans from banks and building societies are tough to get if you don’t have perfect credit and the application process can take weeks anyway. A payday loan from short-term lenders is fast – most are approved and paid out within 24 hours – and your credit history is not such a big deal.
There are those critics who will say that speed should not be a consideration when taking out a loan. However, when, for example, you are facing a couple of weeks until payday with no heat because your boiler broke and needs emergency repairs time most certainly is of the essence.
- To pay for an auto expense – If you need your car to get to work leaving it sitting in the drive or at the garage until your next payday could mean losing your source of income (or running up big taxi bills at the very least)
A payday loan from a short-term lender can help you pay the garage to fix your car fast and by spreading the repayments out over a number of weeks that big repair bill won’t dent your day to day life and basic budget quite so badly.
- To avoid borrowing money from friends and family – Borrowing from friends and family is, for most people, the last thing they want to do. It’s embarrassing and all too often causes friction in the relationship even after the money is paid back.
Often, when people do run into money trouble that, however, is exactly the advice they are given. It’s a common thing for a creditor to say “can’t you borrow from your family?” and many financial ‘experts’ will suggest it too.
However, many people don’t actually have friends or family members with the cash to spare. Or even if they do, giving – or taking – a loan from a family member or friend is, as we have mentioned, fraught with difficulties and often, sadly, ends badly for all involved. Taking out a short-term loan will help you get the money you need without having to risk ruining long-term friendships or ensuring you can never go to a family gathering again.
- To cover the cost of a debt or bill that could cost much more if missed – Sometimes missing a payment – or making it just a day or so late – can have some serious consequences.
Unarranged overdrafts can cost a lot of money and if the missed payment is for a vehicle or appliance you could lose the goods and any money paid on them so far. In these kinds of circumstances, a payday loan often works out to be the best alternative all around.
How could that be? Let’s take unarranged overdrafts. A recent survey of the big UK banks conducted by the consumer organisation Which? decided to compare the cost in 2018 of having a £100 unarranged overdraft for thirty days across sixteen UK high street banks with borrowing the same amount for the same period of time via a payday loan.
At thirteen of the sixteen banks investigated the overdraft cost more than the payday loan! At Santander alone, Which? found that customers are charged £179 for using a £100 overdraft for 30 days. And TSB, HSBC and NatWest weren’t much better, as they all charge £150! That’s still more than the average short-term lender would charge (mainly because the interest they can charge has been capped by law at the lower than the banks’ rates.
In 2018, if you have a steady source of income, and the lender feels fairly sure you can afford to pay one back, short term or payday loans are easy to obtain and responsible lenders will help ensure that any loans you do take out is one you can afford and that makes sense for you.