What are the Differences Between Short Term Loans and Conventional Loans?

It is likely that most people will know a fair bit about conventional loans. Most of us will know about mortgages, personal loans, credit cards and overdrafts and may have even used some or all of them or know people that have used them. This means that if we need to borrow money, it might be these more familiar loans that we will turn to. However, there is now quite a selection of short-term loans that are available for borrowers and it is wise to understand more about these as well. This is because you never know when you might need to use a loan and if you know more about all of your options you will be more likely to make a good choice for you. Therefore, it is good to start by understanding what the main differences are between the short-term loans and more conventional ones.

Credit rating

A short-term lender will not worry so much about your credit rating compared to a more conventional lender. Normally a lender will take a look at your credit report to see whether they think that they will be able to trust you. They will look at your history of borrowing to see how well you have managed to repay loans in the past. They will also look at whether you are good at keeping up with regular payments by analysing your commitment to paying rent, contracts or regular bills such as utilities. They might look at your income as well to see whether it looks regular or not. If your credit history does not look good for any reason, then they may decide not to lend to you.

A short-term lender will have a different approach. Although they do a credit check, they only look at a few things They will want to make sure that you have income coming in regularly so that you can repay. However, they will not be concerned with how high risk you are. In fact this type of loan was set up to help borrowers who have a poor credit record and cannot borrow money elsewhere.

Speed to organise

Often a loan can take quite a time to organise. As well as the time taken to do a credit check, lenders will also have to check your identification by looking at documents to prove your address and that you exist. They will also have to process all of the information and many will work just on weekdays between 9am and 5pm.

Short-term lenders will often be a lot quicker, partly because they do a less thorough credit check (although their identity check has to be through). They also are often open all of the time, so that not only give them more time for processing applications but means that you will be able to get money outside of working hours should you need to.


If you go for a more conventional loan then you will tend to know most of the possible lenders. Often, they will be banks and building societies that have branches on our high streets or that advertise a lot. As we have heard of them, it could make us feel that we can trust them more.

Short-term lenders tend to be less well-known and therefore we may feel that we cannot trust them so much because we do not know them so well. However, it is wise to think about this carefully. Just because we know of a bank because we walk past a branch every day does not mean it can be trusted any more than the one we have not heard of. It is worth researching both to find out more about them before deciding which you will want to go with.

There are some quite significant differences between the types of loans and it is worth understanding what these are. If you have a poor credit rating or need money quickly then the short-term loans might be more useful for you than more conventional loans. Therefore, it is worth considering them even if you have not heard of the lenders. Just because you have not heard of them does not mean that they will not necessarily be as good as conventional lenders, it will vary between different lenders. Therefore, you need to make sure that you identify what your borrowing needs are and find the lender which is the most suitable for these. Try not to discount any lender until you have thought about them in detail as this could mean that you will be rejecting one that is really suitable for you. You need to think about which matches your needs. It is wise to then compare the lenders on value for money, calculating how much they will cost you, how easy you will find it to make the repayments and what the lender seems to be like. It will take a bit of time to do this research but if you are already aware of the different types of lenders, this will allow you to make a more informed choice.

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