A short-term loan is meant to be for borrowing a small amount of money for a short period of time. It has a high cost credit. Nonetheless, the short-term loans can at most be paid within a year. Therefore, the maximum number of instalments one can pay is twelve. The exact number of payments you need to make is stated on the loan agreement. Failing to repay in time would give you a bad credit score.
You should explore the financial services provided at first before deciding on applying for loans. Check for payday loans by clicking on www.loanpig.co.uk . You can get authentic information from a FCA approved direct lender like LoanPig. The maximum amount you can borrow as a LoanPig payday loan is £1500. Even if you struggle with a bad credit score you can expect to get the loan here.
What Are Instalment and Payday Loans?
Basically, most of the people take out two types of short-term loan – Instalment loan and payday loan. Short term loans incur all over high interests but there is some basic difference between these two loans. Generally, payday loans are either paid over a single repayment on your next payday or within two to three months.
On the other hand, instalment loans, as the name suggests, are paid in instalments in regular intervals within a year. When paying in instalments, you may find it easy to repay as the amount is smaller in each instalment rather than when paying the total amount at once. But the interest would always be high. According to FCA regulation, a payday loan can claim an interest up to double of the original loan amount but not more than that.
Assessment of Credit Files
Every loan application is assessed on the basis of various factors to find whether the person is reliable and can afford the repayment on time. The lender will review your credit file which contains your previous credit records and their repayments. If you have a bad credit score, you may have some trouble in the approval of the loan. But, that does not mean that you would absolutely get no loans from any lender. These records remain in the file for 6 years.
You may have bad credit score due to the following factors –
- Failing to repay on time
- Old debts
- Insufficient balance
- Many loan application rejections
You may also get rejected, if you have a limited or no credit record. It is difficult for the lenders to judge a borrower’s reliability with scarce credit history.
It is wise to try to solve your temporary monetary crisis without taking a loan. As you already know that the small term loans can make you repay a high interest, it is best to manage the situation from the emergency stash which you have put aside for some other work. If this does not work apply for the required amount, which you can afford to pay back within time.