Short term loans in their modern day form are considered to be flexible and consumer focused. The varied repayment terms available mean that customers have choice at their disposal when it comes to their short term borrowing needs. Short term loans however, have not always been viewed in this light and in fact for many years had seemingly lost their way in terms of being a trusted and worthwhile consumer borrowing resource. Given the fact that short term loans have only been in existence for about a decade; by comparison to other forms of borrowing this is a relatively short period of time and as such, learning and development for such lenders has been continually required. Put simply, the needs of customers today in terms of short term borrowing, is much different to that of the needs of customers in years gone by. In the early days of short term loans customers welcomed the simple but limited resource given its newness and ability to offer quick excess to money. In the years which followed, the needs of customers evolved in a general sense and this then filtered down to those looking to borrow via the means of short term loans.
The way in which short term loans were initially presented to consumers was via the means of a correctly named payday loan. The payday loan was the first of these online based loans and gave consumers the ability to apply for a small loan in a simple and discreet manner. Given the fact consumers had not previously had the ability to obtain credit neither via these means nor for such small sums, was the product specifically designed to be clear and straight forward. As the name suggests, the payday loan allowed consumers the ability to borrow until their next employment pay date. On this date the loan borrowed would be repaid in full as a single and one-off repayment. Loans being considered ranged from as little as £50.00 and could be taken for as much as £500.00 normally and as such consumers faced a repayment greater than this value when interest was accounted for in the total repayment.
Where the payday loan was undoubtedly a simple and easy to understand form of short term borrowing, the issue was that consumers often struggled to effectively manage the nature of repayment required. Increasingly consumers in a general sense have become adapted to using credit on varying scales and as such have become used to monthly repayments for commitments related to them. This is where the payday loan becomes unstuck. Its rigid repayment options meant that consumers felt ‘forced’ into lump sum style repayments, simply due to a lack of suitable alternative. What then followed the early years of success for short term loans was many years of consumers borrowing via the payday loan and then, in many cases, struggling to make repayment. The end result was that changes needed to be made.
Nowadays the market for short term loans is arguably better than it ever was. Instead of only offering the payday loan as a small time borrowing choice, lenders of such loans are offering installment based loans in addition. This means lenders are giving their customer better choice and flexibility and in doing so allowing consumers the ability to make sensible borrowing decisions. Installment based borrowing means that lenders can present a range of repayment terms and therefore repayment amounts. Where consumers select longer terms the monthly repayment can be reduced and acceptance of an increase in total cost of borrowing accounted for. Equally some consumers may prefer the option to repay in a few short months, allowing a smaller payment compared to a payday loan but still at an overall more affordable and manageable monthly repayment. The installment based loans are quickly becoming the only choice favored amongst short term loans borrowers and with all of the above in mind; it’s easy to see why.