What are short term cash loans?
Customers with short-term cash flow issues generally just want
short term loans, in the form of small payday loans,
as opposed to loans that will involve repayment month after month. Traditionally
taking out a loan involved borrowing large sums of money for several months or years.
However, some consumers value now having the option to access relatively small sums
of money for short periods of time, which the payday lending industry offers.
Hassle-free Cover for Emergency Expenses
If you have a sudden unexpected expense, such as your fridge breaking, the appeal
of a short term loan, such as a small payday loan is apparent, since you can borrow
only the money you need (rather than having to borrow a fixed large sum of cash)
and repay it as soon as your bank balance has been topped up (rather than having
to make monthly interest payments on a long term credit contract).
In this way, short term loans suit people who simply need a small amount of cash
for a short period of time. In spite of this appeal, short term
cash loans are regularly slated for their high APR. However, APR is an Annual
Percentage Rate, designed to compare like credit products over annual periods. Since
short term cash loans like payday loans are
borrowed for less than a month, as they bridge the gap between two paydays, they
cannot easily be compared with loans with longer loan durations. APR will be higher
the shorter the loan duration. As such, using APR to compare short term cash loans
with long term bank loans is misleading. Other factors need to come into play when
attempting to assess loan options of differing durations.
Consider the following example. You need a bit of extra cash to get you through
until payday and a friend lends you £25 for a week. To show your appreciation you
buy him/her coffee for £2.50 when you repay the cash. If this had been a regulated
short term loan the APR would be a staggering 14384.1%. However, most of us would
consider it reasonable to pay an additional £2.50, once you have the cash to do
so, after borrowing £25 when you really needed the money. The appeal of a short
term cash loan or small payday loan is that
when you need access to cash suddenly you can get this, and you are not then tied
into a long term agreement as you repay the loan on your next payday.
Same Day Cash
With online payday loans you can now apply
for a quick short term loan within minutes, and get cash the very
same day, if you apply before 17:00 on a working day, or the next morning
if you apply after this or on a non-working day.
Representative Example
If you borrowed £200 for 28 days you would repay a single payment of £258, with an interest rate of 378% variable per annum. 2670.8% APR representative.
So if you only want a small amount of cash for short period of time and are comfortable
paying 29% interest on the amount you borrow, then a
quick short term loan could be a better option than a larger, longer term
bank loan.