Short Term Loans and Affordability

When considering your borrowing options a popular lending market for consumers is the short term loans market. Short term loans have been available to consumers for many years now and as the years have passed the resource which is offered has adapted and changed to ensure the product remains useful. The key with this unique type of borrowing is to ensure that the loan selected is one which is truly affordable and this means it works alongside the other normal costs you face. This approach of making sure short term loans are affordable is very much the focus of lenders who exist in the modern day market place but this has not always been the case. As mentioned, the market and the products available have changed over the years and this is as a result of not always being able to correctly meet the true needs of the customers who turn to short term loans.

Short Term Loans

In the past when we generally referred to short term loans this was in the content of payday loans. Payday loans are a product and term which millions of consumers are familiar with. In some respects the payday loan was the first type of loan to be offered in the manner of an online lending resource and as such had a few lessons to learn in the early years of trading. The concept of the payday loan was simple in that lenders gave consumers the ability to borrow a small amount of money, quickly, to be repaid on their next employment pay date. The aim was to ensure the product was simple and easy to understand due mainly to the fact that this specific type of borrowing was new and therefore consumers needed to be able to trust they were getting a product exactly as it was presented. Payday loans often meant borrowing in the region of £300.00 and paying £30.00 interest for every £100.00 borrowed, so a £300.00 loan would cost £390.00 on the agreed date.

Although simple the payday loan has not proved to be the most desirable way of borrowing from short term loans lenders as the years have passed and this is mainly due to the fact that they were not always affordable to the customers using them. The lump sum repayment structure lead to customers being put in a position where they could not effectively make repayment to satisfy the loan agreement and making costly interest repayments instead. As the years have passed this fact became increasingly clear and as such lenders had to make a change in order to ensure their product was still used by consumers and offered a product which was genuinely useful. Short term loans nowadays are delivered in a package which allows repayments to be made over a number of months and therefore at a reduced rate. These loans are therefore known as instalment loans. Instalment loans are increasingly becoming the only choice considered by consumers thanks to their ability to be flexible and therefore in fit alongside their existing expenses.