Whenever you face financial constraints and feel the need to borrow some money for a short duration, you will discover that there are very many options to consider. For example, you have a choice to go for short-term loans or payday loans.
To help you decide what’s right for you, we have explained the two sorts of loans – we focus on their similarities and differences if any.
Payday Loans Explained
The above types of loans refer to cash advances offered by various lenders and are due on your payday, i.e., you should clear them as the same day you receive your payments.
The loans can be used to meet crisis costs. For instance, when your car breaks down or your fridge fails to work.
Financial experts recommend taking a short-term loan only when you have cash emergencies that can’t wait until your payday.
Note that payday loans can have high interests, which could add to your costs when making repayments. The smartest way to evade much cost is to pay them promptly.
Short Term Loan Explained
Unlike payday loans that are cleared on the day you receive your regular payments. Short-term loans can last between 2 to 12 months. Since the loans involve a large duration of time, they consequently have lower interests than payday loans UK.
You can consider taking short-term loans for several reasons. For example
- When you need to carry out home renovations
- When your boss doesn’t clear payments on time
- A gap in payments –like when you are shifting one job to another, etc.
Payday loans Short-term Loans: Are There Differences?
Before you decide to either apply for payday loans or short-term loans, it is wise to understand how the types differ.
One of the key things that set them apart is the payment duration. In this case, payday loans have a short repayment duration – normally, not more than 30 days.
Another thing is that the interest rates also differ. Although they can be high for payday loans, the duration is too small for the interests to accumulate.
In the case of short-term loans, lenders will require you to repay a fraction of your loan at the end of every month. And since the repayment duration is a bit extended, you can enjoy flexibility when repaying your short-term loans.
Payday loans Short-term Loans: What’s Right for me?
Choosing between the above two types of loans can be confusing, especially if you qualify for both. To understand what’s right for you, consider how much you need and the duration you’d need to repay.
Generally, you need;
- Payday loans if you have insignificant financial constraints and need to borrow an amount less or equal to your regular payment.
- Short-term loans if you need some more cash that need more time to repay. Short-term loans are good when you want to apply for an amount that exceeds your monthly wages.
According to various financial experts, short-term loans outshines payday loans because they allow you to borrow cash for extended durations. Also, the amount you can borrow is more than in the case of payday loans.
The Bottom Line
Knowing how short-term loans and payday loans work can greatly help you when you are in financial constraints and need cash urgently. If you were in a dilemma, we hope our post helps.