Understanding What Short Term Loans Offer

When it comes time for someone to borrow money, that person may or may not know that they could be entitled to a number of different options and some of these will be better than others. That is why no one should ever rush into applying for finance nor should anyone just take out the first piece of borrowing that comes along their way. It is now completely fair to say that the only way of being able to borrow money in through a person’s local bank and the manager there has nowadays well and truly gone. These days from the financial market place people can look to borrow both short term loans and instalment loan if a loan borrowing is required. Here people can look to obtain a selection of different loan amounts for people to then repay the debt over a number of different payment terms. Credit cards are another common way people use to borrow money and here people pay for different items and also people can withdraw cash on credit via the use of the card itself. In this article I am going to focus on short term loans and say what these can offer to borrowers who take them out.

Understanding What Short Term Loans Offer

I have certainly found that short term loans has become a very common way for a whole host of different people to use. In fact in recent years I strongly believe that not only are more and more people turning to this way of borrowing for their needs I believe this will become a more and more common trend for the future to. This can be a good way a person can often look to obtain amounts up to £500.00 or sometimes more depending on what lenders can offer. People are then required to repay the debt over a number of different repayment terms but over a short time frame. A short term loan to be classed as that way of borrowing will have to fully repaid within a maximum time frame of twelve months. Any loan that is repaid over longer than this will not be able to be classed as this way of borrowing.

Having a loan over a short duration can be a nice feeling as no one will want to have a debt for a prolonged period of time. That is one benefit of this borrowing as well as the fact that these loans can often be obtained by people who have bad credit and people as a result may struggle to get finance from elsewhere yet they do need to borrow money. Another benefit of using short term loans is the fact that people can obtain their cash quickly when looking to borrow and this I always feel is important. It is fair to say that when most people are looking to borrow the chances are they will want the money quickly and the lenders who offer short term loans can make this happen. People after being approved for this finance can often get the money the very same day as to when they applied. 

Direct Lenders of Payday Loans

When it comes to obtaining a small sum of money as a loan, the internet houses plenty of different options for consumers. Whilst short term borrowing is still one of the newest forms of borrowing money compared to some of the longer standing financial aids, the ability to borrow online has now been available for longer than we might think; it’s over a decade in fact. This means that over the years the market has been able to evolve and only ever improve in turns of the service which is offered to consumers. Within the online market for what are commonly known as payday loans, exists two different type of lenders and then several different lending models. The lenders in question can be divided into the direct lenders and then the loan brokers and furthermore, there are several different lending styles, whether that be the classic payday loan or the newer model; the instalment loan. Over the years it has become increasing clear that those who operate in this vast borrowing market want to be able to satisfy for the short term borrowing needs of all, which is why such variation exists. So why is it then that there are two different type of lenders thanks to direct lenders and the loan brokers and how do the different type of loans they offer really work nowadays? Today we will aim to find this out.

Direct Lenders of Payday Loans

First of all the different products, both of which are offered by direct lenders and loan brokers alike. The product most commonly known within this market is probably the payday loan. The payday loan, like its name suggests, allows applicants the ability to apply for a small loan which is then repaid on your employment pay date. The payday loan therefore is a very short term manner for borrowing money. Whether the applicants pay date is 5 days away or 25 days, the product is specifically designed to be repaid as a single repayment. The second and more recent product offering is that of the instalment loan. The instalment loan allows the ability to borrow a small sum of money but instead of asking that a lump sum repayment be made, it gives applicants the ability to repay over a number of pre-agreed monthly instalments. Generally, instalment loans are considered to be the more flexible and customer friendly option but for some the payday loan is perfectly suitable.

Next then, the difference between direct lenders and loan brokers. The reality is the difference is very simple. Direct lenders will consider and either approve or decline applications directly and therefore ‘in-house’. Loan brokers on the other hand act as a loan finder, they will consider the application and then propose a potentially suitable lender, based on their existing relationships with them. So where a loan broker may reduce time in shopping around, a direct lender will mean a direct and final decision. Some brokers will charge a fee for their service, regardless of the outcome whereas direct lenders typically do not. 

Payday Loans are a Common Type of Short Term Loan Borrowing

When it comes time for someone to ever borrow money, that person may or may not know that they could be entitled to a number of different borrowing options. It is nowadays safe to say that the only way to borrow finance is through your local bank and the manager there has now well and truly gone. It is because of this fact that people must never rush into applying for finance and they must then also explore all the different options they have available and at their disposal before any financial application can then be made. From the financial market place these days, people can often look to obtain both short term loans and instalment loans when a loan is required. This way people can then look to borrow a selection of different loan amounts for repayments then due back over a number of different repayment terms. Credit cards are another common type of borrowing and these of course allow people the chance to pay for different items as well as withdraw cash on credit up to a set limit via using the card itself.

Common Type of Short Term Loan

In this article I am going to focus solely on short term loan borrowing and in particular payday loans. These loans have come into heavy criticism over the years due to the fact they can often be expensive. Some of these loans can charge many thousand percent as an APR rate however, this is not at all applicable as this is the annual cost of the borrowing but these loans are often repaid monthly. Once payday loans are obtained they are repaid back to the lender just as soon as that person is paid again from their employer, hence the borrowing term payday loan. These loans are relatively expensive with any interest that is billed to a set borrowed amount. They by many are often seen as an expensive way to borrow a small amount of money for a very limited period of time.

Now although payday loans are often expensive they do have benefits to for what they offer. They are often used as a way to borrow money for people with bad credit. People with bad credit often find it hard to get approved for finance or when they are occasionally accepted it can often be expensive as a way to borrow. With that being said payday loans can often be obtained. The payday lenders who offer this as a way of borrowing money aim to provide finance to these such people who may struggle to get this from elsewhere. Another benefit provided is the fact that the loans can often give people speedy cash. When most people want to borrow money the chances are they will want this quickly and here payday loans can almost certainly help. People apply for these mainly online and if someone is accepted for the finance they can often get the money that very same day.

Direct Lenders of Small Loans

Within the online marketing for borrowing small loans there are two specific types of lenders who exist. These are known commonly as the direct lenders and the loan brokers. The difference between these two providers of small loans can mean a difference in the total amount payable. That said it would be fair to say that both of these providers offer a service which can serve the needs of consumers. So in order to understand the direct lenders and loan brokers a bit better, lets dive deeper into what it is each of them offer when it comes to short term loans.

Direct Lenders of Small Loans

As most of us will already be aware, short term loans or payday loans as they are also known, allow us the ability to borrow a small sum of money, usually no more than £500.00 in value. The loans themselves are accessible via the completion of an online based application form and in doing so we are usually offered a range of flexible repayment terms. Depending on our own individual needs this can mean repayments over a few months or several. Generally, a bit of research will reveal the ability to repay over 2 months or 6 months for example. All payday loan lenders whether they be direct lenders or loan brokers, are now regulated by the FCA who are the Financial Conduct Authority. It is the job of the FCA to regulate and monitor the activities of all lenders who offer these type of loans.

So back to the case in point then, what is the difference between direct lenders and the loan brokers of payday loans and why is there a likely difference in the overall cost of borrowing depending on the selection made? Firstly, we will look at the direct lenders of these loans. A direct lender, as the name suggests offers the ability for us to apply with a specific lender and therefore ‘directly’. When we complete the application online, the lender with whom we submitted our details will make an informed decision as to the suitably of our loan request. When this decision has been made, this same lender will deliver the outcome and if successful, will be the one to deliver the loan to our account. In instances where the loan application is deemed unsuccessful direct lenders will not charge a fee simply for the service of considering your application.

So what does a broker do differently to the service offered by direct lenders? In simple terms it is actually very similar but there are fundamental differences to consider. A broker will consider the information provided in the application and then will attempt to locate a lender who may be able to help with our request. They will make a recommendation to us as to a potential lender based not only on our needs but also the lenders with whom they have an existing relationship with. This means by using the service of a broker you are not dealing with the lender directly in the first instance and furthermore, a broker cannot promise the outcome of the application will be a success. The main point here is that brokers charge a fee for the service of simply looking for a potential lender.