Borrowing for weeks, not years

Not all loans have long terms. A short-term loan is characterized by a much shorter time span – the money is repaid within a few weeks or months and not over several years. Moreover, it is used for covering a specific periodic need and not for buying an expensive asset. The method of repayment varies from product to product: while some products require repayment of the whole sum on a certain date, others involve repayment in several instalments. In both cases, the common feature is that repayment should be made within a relatively short period.

Since a lot of short-term loan products belong to the category of high-cost short-term credits, they are subject to special FCA price caps which do not apply to other types of lending. The interest and additional charges may not be higher than 0.8% per day of the borrowed sum; the maximum amount of default fee is £15, and the cost of the whole loan may not be higher than the sum that was initially borrowed. In other words, nobody has to repay more than double what he has initially borrowed.

As the name implies, a short-term loan would be best suited when there is a need for money that is short-term, and a bill that arises unexpectedly can be repaid within the time period allowed by the loan. The reason why this happens is that the expense of borrowing is compressed into a short period, and therefore the daily rate would be relatively expensive compared to the interest rate on a personal loan that is payable over several years, even though the structure has been built such that the overall cost is proportionate to the loan itself.

To know more about online loans in Bournemouth, Please visit our website: myfinancialbroker.co.uk.

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