Differences between payday loans and short term loans in the UK

There are many possible solutions for financial emergencies that require immediate help. People have always wondered what the difference is between a payday loan and a short term loan

The main difference between the two is the number of repayments and the period of time it may take to make them, let’s have a look at other similarities and  differences;

Is the application process different?

The application process of a payday loan and a short term loan is kind of similar.  The requirements during application for both loans are that; you need to be 18 years and older, you should be a UK resident, you should own a British bank account or debit card, you should have a job and a mobile phone and number.

Typically, the bank account and debit card are for loan disbursements while the mobile number is to contact you when they need certain information or remind you to repay the loan. Most lenders need to see your monthly income and expenditure to work out the amount of money they can lend you and whether you will be able to make the repayments on time. Sometimes, they will contact a third party for proof that you are employed and have a stable income

How long will you wait to receive the funds?

The main purpose of taking a short term and payday loans should be for financial emergencies. Most people take either a short term or payday loan when; they have lost a job, have been involved in an accident, have impending bills to pay or they have run short on medical finances.

It is easy to apply and receive both types of loans. Once you fit all the requirements, you can apply for the loans online and you will receive them in a matter of seconds. Slow lenders may disburse the funds within 24-48 hours. The money is sent directly to your bank account where you can withdraw and use as you please.

Repayment options

It will take you a longer time to repay the short term loan compared to the payday loan. Payday loans require you pay back the full amount plus interest within two week or three months depending on the terms of the lender. it will take you a few more months to repay your short term loan.

With the payday loan, the interest is imposed on the money immediately you receive it in your back account. Short term loan interest accumulates at a rate set by the lender until you finish the complete payment of the loan.

A Payday loan is more expensive than a short term loan?

Both payday and short term loan lenders should not charge their clients more than 24 percent interest for the money you borrow. The amount of interest you pay will depend on the lender’s terms of service.

Short term loan interest rates are more when compared to pay day loan interest rates. You are required to make one down payment when paying back a payday loan buy you can make multiple monthly payments in short term loans.

Final word

Typically, short term loans and payday loans are the same, except for the interest rates, period of repayment and number of repayments.


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