Short Term Finance Options
Short term finance is a subject with many different options, all of which have their own pros and cons to them. As people try to get through Britain’s economic downturn, this type of finance is becoming more and more popular, as it allows people to borrow relatively small amounts of money and then get them paid back quickly, therefore meaning that they are not in debt for a particularly long time. But what are the different options available for people looking for this type of finance?
The main option for people looking for short term finance is credit cards. Up to a few years ago they were incredibly freely available and many people still retain them with generous limits, even if they are now a little harder to get. Today they are often used by those taking advantage of zero percent interest rates, especially for balance transfers. More than this, many cards now offer good incentives for those who spend using them with money back and airmiles popular choices. They are a good, convenient way to spend money but these advantages can also be the biggest disadvantage if you are not disciplined. Be aware though, if you don’t pay the card off in full before when bills arrive interest rates are often quite high.
A more medium form of finance is offered by a bank overdraft. They are available at reasonable rates and are relatively easily to attain for someone who has an established record with a particular bank for amounts up to £10,000. As it’s already linked to your main spending account, they are also very convenient and, unlike a loan, you only pay for what you use. Things to watch though include Facility charges and penalties if you take more than the agreed amount – these can be particularly punitive!
Originally an American concept, the credit crunch has seen its growth across the Atlantic here in the UK. Loans are available for employed people with good credit records to take their “payday” today by borrowing up to £1,000 which will be repaid direct from their pay-cheque. While this offers tremendous convenience, it comes at a hefty price. Much is made of the total interest charges for these loans which sees them have an APR of often 3-4,000%! In fairness though, APR is probably not the best measure by which to gauge these loans but at a cost of about £25 per £100 borrowed (for any period up to about 30 days), they are certainly not cheap. Use with caution and don’t get caught relying on them for multiple months by rolling the loan over.
The main time that bridging loans are used are during the purchase of property, whereby reasonably large amounts of money are needed in order to complete the purchase while waiting for the sale of another. Up to 75-80% LTV is available but be aware that interest rates and fees can be high so make sure of your future cash flow before taking bridging finance.
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