There are many short-term lenders and it can be difficult
knowing which of them you can trust the most. This can partly be because we may
not be so familiar with them in the way that we are with high street lenders.
We may also just know less about them. However, there are ways that you can
work out which you will trust the most so that you can find the best lender to
suit you and your needs.
Consider what you want
It is best to start with thinking about what you expect from a lender. Consider past experiences of borrowing money and what you liked from the lender that you used as well as what you disliked. Also think about what you like about financial companies generally that you might be able to apply to lenders. If you have not borrowed money before then this might be what you will have to do. Even thinking about dealings that you have had with any company might help you to come up with a good plan of what you might want. Consider things like customer service, company history, how long they have existed, how well-known they are and other things that might be important to you. This is a very individual thing so make sure that you consider what is important to you, if anything at all.
Check them out
It is then wise to find out more about the different lenders so that you can decide whether they meet your expectations. For example, you can take a look at their website and see whether you can find out more about them there. You might be able to find out some information on personal finance websites as well. You will probably find things on personal websites and social media pages although you will need to make sure that you are happy with that information as it is not from such a trusted source and may just be one person’s opinion rather than well research factual information. Look at lots of sources of information too so that you can check whether they are in agreement.
Ask people you trust
It can also be worth chatting to people that you trust in order to find out what they think. They might of used a lender themselves or know other people that have and therefore able to know which are best to use. It is really wise to ask people that you know because they are more likely to have your best interests at heart. This means that they are more likely to be honest when they give you information, whereas when you are looking online it is hard to be sure. It might be that some websites are earning commission on leads so will highly praise lenders that pay them more and they may have had no experience of using them. Or they might have positive reviews that are all written by the lenders themselves. Of course, they will not all try this sort of thing and possibly none of them will do it, but it has been known to be done by some businesses so it is important to be aware of the possibility that it might happen so that you can make sure that you do not rely on this sort of thing.
It can be difficult to trust a company that you have not
dealt with before. However, if you are happy that the terms and conditions of
the loan seem fair and legally binding then hopefully you will have no reason
to distrust them. Contact them before taking the loan out though and find out
more about them. This will also help you to get information that will help you
to decide whether you can trust them. It is worth being aware that if you were
investing or saving with them, then trust would be more important as they could
steal your money. With a loan it is them giving you money so it is really they
that need to trust you more than the other way around. Just make sure that you
are totally aware of what they can charge you so that you can make sure that
they stick to their own terms. You will need to make sure that you are aware of
them and that you understand them too. It might be necessary to get some help
with this and terms and conditions are often worded in a very complex way and
it is not always clear what they mean. If you are not sure then get customer
services to explain it to you, but get something in writing that you can use as
proof later, if necessary. Hopefully all will go well though and you will not
need to use it, but it is always good to be prepared just in case.
There are now several different types of short-term loans
and it is good to make sure that you are picking the one that is most suitable
for you. Most people will choose this sort of loan if they have a poor credit
record or need money quickly and they can all provide this. However, there are
choices between different types and it is a good idea to understand the
differences between them so that you can decide which will suit your needs the
A payday loan is probably one of the most well-known short-term loans. It has probably been around for the longest and most people will have heard of it. What makes it different to other short-term loans is the fact that it only usually lasts for a few weeks. This really is short-term and borrowers are expected to repay everything that they have borrowed plus the interest on the payday loan that they have accumulated when they next get paid. These are good for anyone who really does not like being in debt and wants their loans to be over with as quickly as possible. It is also useful for anyone that just wants to borrow a small amount of money for a small amount of time.
An instalment loan does what it says and allows repayment in instalments. This is really handy for anyone that feels they will struggle with the lump sum repayment that is required for the payday loan. It may also allow borrowers to borrow a bit more money as they will be able to spread those repayments rather than having to find a way to repay a lump sum of money all in one go. Some people will just take out a loan without considering how they will manage to repay, but those that do might feel that repaying in instalments will mean that they have a better chance of being able to make those repayments more easily.
A guarantor loan will allow you to borrow a significant amount of money. Not only is it repaid in instalments but you will allocate a guarantor, who has a good credit record, that will make any repayments that you miss. This reduction of risk means that the lenders will be happier to allow you to borrow more money even if you have a really poor credit record.
As you can see there are big differences between the loans.
If you want to think about which might be the best for you, you will need to
think about what you are looking for. Ask yourself a series of questions –
- How much money do I need to borrow? –
this is something which you should always ask yourself. Make sure that you are
finding out how much you need rather than how much you want. It is often
tempting to borrow a bit more money than you need. You might think that it will
be there just in case you need it or that you will be able to treat yourself to
something a bit extra with the money. However, this is not a very sensible idea
as you will end up paying more as a result of borrowing more, so make sure that
you get the figure right.
- How much can I afford to repay? – it is a
good idea to work out how much you can afford to repay. Take a look at past
bank statements and work out what you would normally have left and whether that
would be enough to make this payment. It might be that you can cut back on your
spending as well, in order to make sure that you have enough for the repayment,
but you will need to check.
- Do I need instalment repayments? – As
part of looking at how much you can afford to repay, you will be able to see
whether you might be better off with a loan that you repay in smaller
instalments or one where you can afford one lump sum payment.
- Do I know a suitable guarantor? – if you
are thinking about getting a guarantor loan then you will need to make sure
that you are confident of finding a guarantor. You will need to find a friend
or family member that will be willing to help you out if you miss loan
repayments. They will also need to have a good credit record.
Once you are clear on these things it should help you to
automatically be pointed towards the right loan for you. You will need to make
sure that you are calculating correctly and that you really are picking the
best loan. It might be tempting to pick a loan type that you are more familiar
with, for example, but it is wise to try the one that will suit you the best as
that is most likely to suit you financially and you will be more likely to be
able to easily manage the repayments.