Short Term Loans for Bad Credit

Updated: March 26, 2024 Author:

Sometimes, life can throw curveballs at you, and they often come with a price tag that can be hard to deal with. Maybe your car needs an unexpected repair, or an appliance gives up on you. Or the current cost-of-living crisis is making it hard to make ends meet. 

When your credit score is low, these things can feel like the end of the world, and paying for them might seem impossible. But thankfully, there is a way out: short-term loans are a viable option if you’re facing financial obstacles. 

What is a Short-Term Loan?

A short-term loan is a lump sum you can use to bridge a temporary financial gap for most personal reasons. These loans can range anywhere from a few hundred to a few thousand pounds, but they must be repaid within a shorter timeframe. There’s no hard and fast rule for that timeframe, but it typically ranges from one to three years. 

Because these loans are for smaller amounts of money and are repaid quicker, the application process is quicker, and the eligibility requirements are less demanding, they can be more quickly and easily utilised than traditional loans. 

How Do Short-Term Loans Work?

Short-term loans operate through a relatively straightforward process initiated by applying with a lender. If your loan is approved, you’ll receive the amount directly, and then you’ll have to repay it in fixed instalments as per the loan agreement throughout the loan term. You can use this money for almost any legal purpose. 

Advantages of a Short-Term Loan

Although loans are inconvenient and stressful if not managed properly, short-term loans have many benefits for borrowers with bad credit. Here are just a few of the pros of short-term loans:

  • Flexible Usage: Some loans have specific purposes, but short-term loans are flexible. You can choose how to use the funds with almost complete freedom. Through this, you can tackle many expenses, such as car repairs, medical bills, or home requirements. 
  • Lower Interest Rates: Short-term loans generally offer lower Annual Percentage Rates (APR) than payday loans, another option for borrowers with bad credit. Although interest rates can be higher than other traditional loan alternatives, short-term loans are a more affordable choice for immediate needs. 
  • Improved Credit: If you use your short-term loan responsibly, it can improve your credit score. Ensuring you make your repayments on time will demonstrate how you manage credit effectively. This can help you find better financial options in the future. 

How to Get a Short-Term Loan with Bad Credit

It’s possible to obtain a short-term loan, even with bad credit. There are a few steps you can take to work your way towards the loan you need: 

  1. Review Your Credit Report: Before you apply for a loan, get a copy of your credit report. Review it thoroughly to ensure there aren’t any errors negatively affecting your score. Also, make sure your credit meets a lender’s requirements. 
  2. Improve Your Credit Score: If you don’t meet a lender’s qualifying requirements, you might need to improve your credit score. This can normally take time, but there are a few quick steps you can take as well. Make sure your bills are paid, don’t take on any added debt, and look into using a credit card. These things will help you establish a positive credit history. 
  3. Check Multiple Lenders: Don’t settle for the first lender you come across. Different lenders offer varying rates, fees, and repayment terms. Compare them to find the one that best suits your needs. Websites like ours allow you to compare short-term loan options from various lenders.
  4. Consider Getting a Co-Signer: A co-signer with good credit can immensely improve your chances of loan approval and help you secure a lower interest rate. However, if you’re going to get a co-signer, make sure they understand the responsibility and risks involved.
  5. Apply Officially: Once you’ve found the right short-term loan offer, you can complete and apply. Your application will include personal details and potential documentation. 
  6. Receive Loan: You’ll receive the amount if your application is processed successfully and the loan is approved. This is usually in the form of a direct deposit into your bank account. 
  7. Set Up a Repayment Plan: To avoid spiralling debt, it’s a good idea to set up a realistic repayment plan to ensure you can make your monthly instalments on time. Missing payments will damage your credit score further and get you into more of the financial trouble you were trying to overcome in the first place. 

Choosing the Right Short-Term Loan 

So many short-term loan options are available these days, so picking the right one demands careful consideration. Here are some key aspects to keep in mind when you’re evaluating lenders:

  • The High End of the Interest Range: Every lender offers a range of interest rates for loans. They tend to give the higher end of that to borrowers with bad credit. Therefore, it’s essential to be aware of the higher interest rates a lender offers and factor that into your decision. 
  • Loan Fees: Interest isn’t the only price you pay on a loan. Many lenders charge additional fees for origination and processing and may have hefty penalties for late payments. Understanding these fees will allow you to calculate the total cost of the loan and avoid hidden charges. 
  • Repayment Conditions: Pay close attention to the repayment terms, including the due date, frequency of instalments, and any prepayment penalties. When choosing a repayment schedule, consider your income and budget. 
  • Co-Signer and Co-Borrower Options: A co-signer or co-borrower with good credit could help you get better rates. When comparing lenders, consider whether they will allow you to involve a co-signer or co-borrower to help you shoulder the loan responsibility.
  • Customer Support: The most reputable lenders have reliable customer support that will address any questions or issues you may have throughout the loan process. Choose a lender with a transparent and accessible customer service department so that they can help you out if you run into economic trouble. 

Final Thoughts

Short-term loans can help you manage your financial responsibilities. Even with bad credit, you can find a loan that works for you. If all this information feels daunting, don’t worry. We’re here to help you navigate all kinds of bad credit issues. Contact us today to find out how we can help you recover financially.