When people talk about short term loans, what they often mean are payday loans. You may have heard about the bad press that payday loans have been getting, particularly before April 2014 when their practices were much less regulated than they are currently. Payday loans became associated with phrases like ‘legalised loan sharks’ and ‘bad debts spiralling out of control’, so some promotional materials started calling them short term loans. This is a big generalisation however, and there are still other types of loans which fit into the ‘short term’ descriptive bracket and are very different to payday loans and how they work.
Guarantor loans are a relatively new but popular addition to the lender’s market. Although the idea behind having a guarantor isn’t a new one, in their current form they allow those with a bad credit history (or those with no history of borrowing at all) to get a decent sized loan (up to £7,500) with the help of a guarantor. They come under the short term umbrella because you’re able to pay off a guarantor loan over 12 months if you want to. Obviously, for larger amounts you may be restricted to a higher repayment term to make it easier, but with amounts from £1000 to £3000 you’re often given the option of paying it back over the course of just one year.
Logbook loans are also less well-known than other types of lending aimed at those who cannot get funding from their local bank or mainstream lender. They’re a type of secured loan, which means that your borrowing history may not matter as much as the loan is based upon the asset you put up as collateral for the loan. Of course, in this case the collateral used is your vehicle. You need to outright own your car, van or motorbike in order to borrow against the value of it. The logbook lender will give you around half of the value of the vehicle as a loan, and although you can still use it while you’re paying the loan back, the vehicle will technically belong to them until you’ve cleared the full amount you owe. These loans can be very expensive, so it’s worth shopping around. If you don’t pay back the loan then the lender would be within their rights to seize your vehicle as payment, so beware of taking out a logbook loan that you know you can’t really afford!
Instalment loans can be paid off anywhere from 1 to 18 months, with some lenders offering 2 year loan terms. They’re unsecured, which means that you won’t need any valuables to put up as collateral. The amount that you can borrow will probably be worked out via your credit history, but don’t worry – many lenders will consider those with a poor credit history; you just have to be prepared for a higher rate of interest. While you don’t need a guarantor or a valuable in order to get a loan from an instalment lender, they may be too expensive for your needs, so be sure to do plenty of research first.