Please note: High-cost short-term credit is unsuitable for sustained borrowing over long periods and would be expensive as a means of longer-term borrowing.
We all experience times in life when we need money quickly. But before you start comparing payday and short term lenders, you should make sure you’ve exhausted alternative options. Here’s a handy list which includes obvious suggestions like deferring the expenditure or borrowing from friends, but also less obvious ideas like arranging a payment plan with your creditors or requesting an overdraft limit increase.
But if you’ve already considered these and have decided to take out a short term loan, how do you find the best one? Or, with the eye-watering interest rates involved, should that be the least-worst one? Let’s look at some typical scenarios.
I only need a very short loan
Since Wonga went South, loan companies are getting increasingly nervous about offering high-interest loans of less than a month – meaning less choice for consumers. Check that any lender you consider is legit by the Financial Conduct Authority (FCA) by searching its register of authorised companies. On finder.com we’ll only ever review and link to lenders that are authorised and regulated.
Finder's pick for very short loans: Moneyboat
- Borrow £200 to £1,500 over 2 months to 6 months
- Instant decisions in most cases
- Fast online application with no fee
Representative example: Borrow £400 for 4 months at a rate of 255.5% p.a. (fixed). Representative APR 939.5% and total payable: £597.48 in 4 payments of £149.37.
I don’t need the loan straightaway
If you can plan ahead, you can make some big savings. Companies like Creditspring are looking for innovative replacements for traditional payday loans. With Creditspring you sign up to a relatively cheap monthly subscription plan, and after 14 days you can take out a short term loan.
Finder's pick for when you can plan ahead: Creditspring
- Borrow up tor £500 twice a year, available on demand.
- Monthly membership fee of £6 or £8.
- Repay each advance in up to 6 monthly payments.
- 0% interest rate – only pay back what you borrow plus the monthly fee.
Representative example: Total amount of credit of £1,000 over 12 months. The first payment for each advance is £83.35 followed by 5 monthly repayments of £83.33. 12 monthly membership payments of £8. Representative APR 38.6% and total payable: £1,096.
I might be able to repay early
Most payday lenders let you repay early without penalty, but the best lenders only charge interest on the days you borrow, which is a little different. That means that repaying early offers guaranteed savings, which is pretty hand when you could be paying up to 0.8% interest each day.
Finder's pick for flexibility: Sunny loans
- Repay early at any point without penalty
- Only pay interest on the days you borrow
- No application, admin or late fees
Representative example: Borrow £100 for 8 months at a rate of 204% p.a. (fixed). Representative APR 568% and total payable £199.33 in 8 monthly payments of £19.93. You can repay this loan early.
10 features that can make a short term loan the best for you
Here are ten simple questions you can ask while searching for a short-term loan:
- What’s the overall cost? Since these loans are far from cheap, the most important thing to consider is usually the total cost of borrowing. The APR of payday loans can be confusing, but lenders must also tell you the projected cost upfront. Look to keep the overall cost as low as possible, while making sure the repayments are affordable for you.
- Is the lender legit? Only borrow money from loan companies authorised and regulated by the FCA (that’s the Financial Conduct Authority). It’s quick and easy to check that the lender you’re considering is in the FCA register.
- Does the lender offer a loan term that suits you? As a general rule, the longer you borrow for, the more a loan will cost. But sometimes it’s necessary to spread repayment of a loan, in order to make each instalment manageable. When you borrow for longer, although it’ll cost more, you’ll usually be able to access better rates. If a payday/short term lender doesn’t offer the length of loan that you’re after, then try another – there are plenty of them in the market.
- Does the lender let you repay on a date that suits you? The best loans allow you to specify the exact date(s) on which you’d like to make a payment. You’ll usually want to align this with when you receive your income. If you get paid weekly, the the best loan for you might allow weekly repayments.
- How long does it take to process the loan? Some of the best short-term loans ensure that you have access to the approved funds the same day, within hours or even minutes, while others, for example, might not approve and issue loans outside of office hours. If the turnaround time is important to you seek out a lender offering faster loans.
- Are you aware of all the fees? While some of the best short-term loans provide quick access to funds, take the time to find out just how much you’ll have to pay in the form of fees. The best short-term loan company in this regard is the one that charges the lowest fees. It’s rare to find admin/product fees in this game, but fees for late payments will be anywhere from £0 to £15. Missing a repayment is a terrible idea – you’ll damage your credit record, annoy your lender and find it harder to borrow in future.
- Does the lender accept bad credit applications? If you’re looking for the best bad credit short-term loan, take into account that most short-term lenders accept applications from individuals who don’t have good credit history. If the lender you’re looking at requires good credit history and you aren’t eligible, you could simply move on to the next.
- Can you save money by repaying early? The best short-term loan company should let you repay early at any time, and should only charge you for the days on which you borrow.
- Is there a store network and online presence? Any lender that calls itself the best short-term loan company should offer you convenience when it comes to borrowing. This may mean they have a wide network of stores across the country or that they let you apply for and manage your loan online.
- Is it easy to track and manage your loan? Staying on top of your loan is important. If you live on your mobile, then the best lender might offer a decent app for tracking your loan, making payments etc.
Compare short-term loan costs
Here are some loan providers you can apply with. Note that the max loan amount is based on the lender’s max amount and will vary based on your state.
What are the pros and cons of short-term loans?
- You can get your money quickly. When you’re applying for a short-term loan, you can often get your money immediately after approval if you apply in-store, and many online lenders transfer approved funds to your bank account the same day.
- Freedom to use the money as you like. You apply for a short-term loan for almost one-off expense.
- Bad credit is OK. Short-term loan providers will usually consider applications from people with poor credit histories. They’ll typically focus more on how affordable the loan would be for you.
- Really, really expensive. While interest is capped by the FCA, it’s capped at 0.8% per day. That’s 80p per day for every £100 you borrow. Disappointingly, a large proportion of the lenders operating in this space do simply charge the maximum
- Disreputable lenders. If a short-term lender sounds great and is offering rates too good to be true, be sure to find out if they are. Ensure the lender complies with all relevant regulations and that they are operating legally.
- Small loan amounts. If you’re using a new lender for the first time, it’s likely they’ll only offer you a small sum.
Anything that isn’t “the best” with these loans?
Before you apply, ensure that you won’t have problems repaying the loan. If you think you might have trouble, don’t take out the loan. Late or missed payments usually lead to fees and additional interest, and negatively impact your credit profile. Always work the repayment schedule into your budget, and the best loans will remain the best.
Even the best short-term loans can end up costing much more than originally anticipated, especially if you don’t repay your loan on time.
Bear in mind that while the best short-term loans will give you quick access to the money you need, there are a number of competing short-term loan providers vying for your attention, so compare all your options before applying.
Questions you might have asked
We understand that you may be cautious when applying for short-term loans. Here are some of the frequent questions our users have asked.
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