You may think that a loan is just a loan, correct? Well essentially that is true, but did you know that there are a multitude of different loan types available?
The basic elements of a loan agreement is that you agree to borrow a set amount of money and that figure would then be repaid, with interest, and this essentially forms the basis of all loan arrangements – money is borrowed and is subsequently repaid back, at an agreed date, with interest added on top and it is this which essentially forms the structure of all loans.
Whilst the basic structure of a loan is simple to understand, there are a multitude of different loan variants which can add confusion to the average person who may be looking to borrow a sum of money, using a loan arrangement. We therefore thought it would be useful to explore two types of loans available within the United Kingdom, to help give people an understanding of what type of financial agreement they may potentially be entering into; indeed, by searching online, you will be presented with a multitude of different loan options. We believe it is important to understand what type of loan arrangement you are entering into and, perhaps more importantly, what potential impact will this will have upon your ability to borrow money.
Short-term loans are exactly what they ‘say on the tin’ – a small sum of money that is borrowed for a short period of time and paid back an agreed date. Entwined within the short-term loan lending arena are different variables of loan arrangements; the minority of short-term loans will be secured and many short-term loans will be unsecured.
A secured loan is when the borrower puts forward an asset to be secured against the potential debt. In the event the loan is unable to be repaid then the asset could be at risk of being lost. It is therefore always worth considering carefully, prior to entering into any secure loan arrangement, what the asset is that you may potentially be putting forward and could you afford to potentially lose that particular asset, in the event you are unable to repay the money that you initially borrowed.
When examining short-term loans, essentially it is a loan which is borrowed for an agreed period and the arrangement would typically be under 12 months. Some of the advantages of using short-term loans are that the money have borrowed is repaid quicker in comparison to that of the longer term, secured loan types. Some of the disadvantages of short-term loans are that the interest you will pay will often be high and therefore this kind of borrowing should only be considered when all other avenues of loans have been fully explored.
Although short term loans are useful and a significant advantage is that you can repay the outstanding debt quickly, the fact remains that any money borrowed through any kind of loan will accrue interest; with short term loans often come higher levels of repayments and this should always be factored into the decision making process when considering taking out a short term loan.
Quick loans are essentially another form of unsecured loan, which are simply wrapped up in the term ‘quick’. Quick loans are particularly useful for people who need to borrow money quickly. The term ‘quick loan’ relates to two essential components of an unsecured loan. Loan companies associate themselves with the term ‘quick loan’ because they can often have various expedient elements integrated into their loan operations; loan processing is often fast with many of the unsecured loan companies who can provide quick loans. If the essential application criteria has been met for the loan application when the application has been submitted, then the initial processing/administration of the loan can be incredibly quick and, in some cases, may take as little as 60 seconds to process.
The second stage of the loan process which is entwined with the term ‘quick’ is the payment of the loan; the deposit of funds into the account is often fast with many loan companies, who offer unsecured lending. Whereas a secure loan application may take a protracted period of time to borrow, given the fact that there is an asset incorporated into the loan arrangement, a quick unsecured loan is essentially asset free. Any formal agreement on the loan being processed is based upon a loan applicants’ current financial status and data such as previous credit history, residential status, employment status and the loan applicant’s income and outgoings are all factored into any credit making decisions.
It is essential to reflect on your credit state, prior to making an application for a loan. A simple consideration of any previous lending you have had, your own employment status and perhaps the most important factor to consider is, can you afford to pay the money back which you have borrowed – if you are experiencing any current financial difficulties, the answer may not always be to turn to quick loan providers as a solution. There are many debt charities, such as step change and national debt line, which should be your first port of call in the event you are experiencing difficult financial circumstances.
Short-term loans and quick loans are just two examples of unsecured lending which have proliferated the loan market space. As with any loan application always ensure you read the terms and conditions of loan applications prior to submitting your details into a loan application. The simple fact is that short-term loans and quick loans are essentially the same thing and should therefore not be considered in isolation of each other. Both are unsecured loans which have essentially simply been packaged in different ways. Short-term loans and quick loans both have positives and negatives and careful consideration should always be given prior to making an application.