High Cost Short Term Credit

High cost short term credit, also known as Short-term loans are an excellent resource that can help you cover urgent and essential expenses when you are in a dire financial situation until you get paid.

The catch with short-term loans is that, if you simply focus only on getting immediate financial relief without looking ahead, you could be getting yourself into a vicious cycle of debt.

The truth is that these types of loans are only meant to help you with your short term financial difficulties and are not a long term solution for your financial woes.

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Using short term loans

Using short term loans the right way can offer you more spending options than you probably ever imagined existed.

However, before you actually decide to apply for the loan, there are some questions you should ask yourself just to be sure that you are making an informed choice.

  • Do I really know exactly what this loan will cost me in the long run?
  • How much am I going to repay,
  • What deadline should I have for repayment and how much is the penalty if I fail to repay on time?

If you answered ‘YES’

If you answered ‘YES’ to all the questions, applying for a payday loan might be a good idea for you. However, before you actually send that application, here are some few things that you should keep in mind:

  • Don’t borrow in excess of what you need. Be very careful when picking a lender. Only deal with a lender who is registered with FCA – Financial Conduct Authority and is a member of a reputable trade body like the CFA- Consumer Finance Association. The CFA is the only body mandated to monitor how lenders in this sector operate.

 If you answered ‘NO’

Here is our suggestion if you answered ‘NO’ to even just one of these questions asked before…

  1. Not so sure about the cost?

In case you really don’t know how much the loan is going to cost you, don’t hesitate to ask more questions. A Good Customer Practice Charter exists and there are four major trade bodies that short term lenders subscribe to. Ideally, each of these bodies has its own Code of Practice. What this means is that if you contact any of these lenders, you should get a clear understanding of exactly what is involved without experiencing any nasty surprises.

  1. Do you need more time to repay?

While short term loans are generally paid within just one month, it is advisable that you look for a lender designed for a longer repayment period, just in case you need more time to make the repayment. However, this can raise your costs and you need to do your homework very well.

Applying for high cost short term credit

If you find that you apply for short term loans regularly and you can barely make it through a month without one, it is highly advisable that you STOP borrowing and have a critical look at your current financial situation. Here is a Guide to manage your money!

Using short term loans for purposes of socializing and treats can be a very expensive way of living and it is not sustainable in the long run- it would be much better for you to come up with a more affordable plan to cater for your spending.

High cost short term credit

 Struggling to repay your loan?

Can’t repay your payday loan?

Where do you turn to if you find yourself struggling to pay back your payday loan on time?

In case you are using the short term loan for paying off other debts or financing your essentials, speak to your lender. There might be various options available for you.

You might want to consider requesting a ‘repayment plan’

This option allows you to pay the interest incurred on the due date while you get one more month to repay back the loan money. This can really help you get your financial life in order, for instance, if you expect some more money next month. But still keep in mind that you will need to repay the loan you borrowed next month and, in short, you are simply increasing the cost of the loan.

A repayment plan isn’t an ultimate solution. Even if you are approved for it, you should be very honest with yourself on whether things are really going to work out much better for you or not if you take this option. Remember that you might still find yourself in a similar situation when next month’s expenses come knocking. A less expensive option you should consider is to pay half of the loan money now and repay the remaining balance only. This will help slash down the charges. This option is offered mostly by CFA members.

If you are doubtful of whether you will have solved your financial problems in one month, notify your lender of the financial difficulties you are having and they will inform you about the options available for your situation. These might include agreeing to make smaller, more affordable repayments over the next few months or stopping interest charges. While this course of action might offer you a way out, remember that it could have a negative impact on your credit rating and getting a loan in the future might be harder for you.

Don’t struggle on alone

If you have much bigger worries than just a single short term loan and there are various companies you owe money to, such as banks, short term lenders and credit cards, seek help from other people rather than just struggling on your own.

The companies listed below offer free debt advice and they will design a plan for how you should deal with the people you are in debt to and ensure that you can at least afford food and somewhere to sleep.

StepChange Debt Charity


0800 138 1111

National Debtline

National Debtline

0808 808 4000

The Money Advice Service


0300 500 5000

Do I borrow or not?

You are the only person who can know what the right thing for you to do in your situation is, but it is our hope that we have provided you with useful info that you can use to make sound decisions.

The most important thing is that you be honest with yourself regarding the consequences of getting the loan and consider whether an alternative course of action might be better for you in the long run.

General Information

This information comes to you through a collaboration of The Consumer Finance Association and The Money Charity.

The Consumer Finance Association is a registered association that ensures the interests of reputable lenders of unsecured personal loans and short term loans are well represented. Visit www.cfa-uk.co.uk to read more about the CFA.

Money Charity is a financial capability charity based in the UK and it is dedicated to assist people in managing their financial life. The charity betters the financial situation of their consumers by dealing with all the aspects of the credit industry and financial services. Visit www.themoneycharity.org.uk to learn more about The Money Charity.