What is the difference between short term loans and bank loans?

Bank loans, or personal loans, as they’re also known, are loans that you take out through your bank. Some people borrow with their regular, while others will seek out a different bank specifically for their personal loans if they offer lower interest rates. Bank loans can be one of the cheaper ways to take out unsecured finance, but banks will always look for an impeccable credit record.

Alternative lenders, such as short-term lenders, can be more flexible with their lending criteria and even loan money to those with less-than perfect credit ratings. However, short term loans have higher interest rates - usually around 0.8% per day, which is the cap that the Financial Conduct Authority imposed on the industry.

You can take out a bank loan for any purpose, but many borrowers use them to cover things like house renovations, consolidating existing debt, or to buy new cars. Personal loans can help people to spread the cost of these large expenses or pay for something up front without having to save first - providing they can afford to make the repayments each month.

Most bank loan customers borrow between £2,000 and £25,000 and their loans over the course of a few years. Short term loans, by their nature, are much smaller, and are repaid over just a few months.

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Representative Example: Borrow £400 for 4 months: 3 monthly repayments of £156.09 followed by a final repayment of £156.07. Total repayment £624.34. Interest rate p.a. (fixed) 288.35%. Representative APR 1,267.9%. 

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