When looking forward to borrowing cash, individuals look for the best option for their circumstances and finances. Finding the one among various options is tasking. However, small personal loans fill the gap perfectly. One can use these loans for any emergency or short-term purposes. It is a popular choice among people with good and poor credit histories. The blog discusses why short-term loans are the thing of the future for emergencies.
Let’s first analyse the consumer financial backdrop.
How has customer behaviour to credit transformed since 2022?
The year 2022 re-defined the rapidly rising inflation in the UK. The squeezed household incomes profoundly impacted the views about one’s finances. Furthermore, the cost-of-living crisis amid the rising inflation and slashed job market changed the customer’s behaviour significantly. According to a source, “Around half of the remote workers plan to shift to work from home as a direct reaction to increased cost of living.” Individuals became much more conscious of their finances.
As a result, the unsecured loan market suffered severely during the 2022 quarter because of the credit crunch. Limited income and the ever-rising economic crisis significantly impacted credit scores. However, 2023 saw improvement in customer’s finances. Customers living from paycheck to paycheck depend on short-term small loans to finance their needs in-between. It is because they are easy to apply for, quality and manage within the current financial situations.
It is just a small overview of the customer’s behaviour towards the loans. Now, let’s discuss the prime title. It discusses why short-term loans are the thing of the future for emergencies.
Can Short-term loans transform finances today and in future?
Yes, it definitely can. Let’s discuss how.
According to a recent poll conducted by Nationwide, “around 74% of individuals are worried about personal finances and prioritise covering essential costs.” Precisely, the report reveals a fine line between essential and non-essential purchases. This is why consumers’ spending on utility bills is 23% higher than last year, followed by Childcare and education expenses.
These statistics reveal an individual’s inclination towards prioritising spending and saving more. It is where short-term or small loans fill the gap. Sometimes, finances are not all about savings and cost-cutting but overall credit and financial improvement. Here is how small loans assist you there:
1) A helpful tool to deal with rising costs
With the constantly shifting economic curve, the costs of several things an individual surrounds increased severely. For example, According to the Gov.UK report, “ In 2023-24, around £46.7 billion individuals plan net expenditure on school budget equals to £5229/pupil. It is £260 higher than in 2022-23.”
Furthermore, it may rise more in the upcoming years. Individuals with low or unchanged incomes struggle to meet this change in schooling their children. Small loans help individuals counter the fees money. One may qualify for a small sum of up to £2500 to fund the fees. It is easier to qualify with the existing income barrier.
2) Pacifies the unemployment stress
According to the House of Common Library, “ the current unemployment rate in the UK is 4.3%. Under which individuals around 16+ years of age go unemployed.” The primary reason behind this is – not enough job opportunities, the unwillingness of the unemployed to return, and long-term illness impact. It is the reason the government provides support to the unemployed and has increased the benefit income for the year 2023-24.
For example, the JSA allowance for individuals under 25 has increased from £61.05 in 2021-2023 to £67.20 in 2023-2024. However, one receives this amount per week. It may help individuals with essential costs but not emergencies.
What if you need £1000 immediately to counter a medical concern?
With limited income and benefits income, it is challenging to counter that. However, small loans may help you here. If you even have £100 as savings or cash available, you can get around £1000 as instant cash disbursal with small loans. You must reveal the part-time income that you earn your living from. Moreover, the flexibility to pay the amount in comfortable instalments makes short-term financing solutions promising for the future.
3) Help beat utility payment fumes
According to the Office for National Statistics, “ The Gas and electricity prices rose at 1.7% and 6.7% respectively in August 2023.” Following this, around “ 47% of individuals in Great Britain use less fuel in their households.” The situation is grim. Paying monthly bills despite earning a decent salary has become tasking. Most individuals skip payment or roll over to the next. The primary reason for this is- minimal cash flexibility.
One can hardly save something out of the income after meeting liabilities. It is the reason that “4 out of 10 individuals report they find utility bills difficult to afford.” It is the reason small loans or short-term financing options prove relieving here. One can pay the dues timely by taking up a quick loan. Alternatively, it keeps your savings safe. Having zero savings or saving nothing for months could lead to irreparable circumstances.
Moreover, you can avoid the penalty costs that may follow.
Okay, but how short-term loan is relieving?
It is the best, as one could easily budget for the loan repayments given the fixed interest rates. It contrasts with paying bills through credit cards, where you do not know the amount you’d pay. Fixed and capped interest costs make it the best go-to financial equipment for individuals.
4) Help boost other financial aspects
What is the worst impact of the falling finances you encounter?
Yes, it is none other than credit score dropping by 20 points in a row.
Tight finances, low cash flexibility, inflation and low income make it impossible to maintain a credit history. If you can relate well, you may find it hard to get affordable credit cards or loans to meet your lifestyle goals.
The primary reason for the credit score drop is none other than missing payments or defaults. As mentioned above, unaffordable utility bill payments lead to arrears. It impacts the credit score if one skips payments continuously. Other reasons for low credit scores could be:
- Too many high-interest debts
- Low or inconsistent employment history
- Low income
- Connection with poor credit accounts
- Past credit mistakes- closing credit cards
Whatever it is, you can still bounce back with improved financials. Small loans find you there. You can boost your credit score by taking small loans for short-term needs like- bills, subscriptions or consolidating credit cards. You must make timely payments by scheduling a repayment arrangement suitable to you. By the end of the agreement, you may see significant credit improvement. However, you must ensure disciplined spending by then.
To conclude, short-term or small loans are the thing of the future. These loans help individuals with countering quick cash needs hassle-free. Moreover, it helps control and manage finances well. The above pointers reflect that in the best positive light. However, you should be conscious about finances and requirements while taking up loans. Ensure to go through the terms before providing your consent.