Short-term loans can look like quite an attractive prospect. They will lend you just a little bit of money for a short term. This could mean just borrowing a few hundred pounds for a month. It sound pretty harmless and could be very useful. Many people have trouble managing form on pay day to the next and will use a loan like this to help them through.

However, it is worth looking at the finer details of these loans. If you look at the costs you may be surprised. The percentage rates can be extremely high and this can mean that they are very expensive. It may not seem like much money, maybe paying £66 for a £200 loan for a month, but that works out at a huge interest rate, much higher than you would probably pay for an agreed overdraft. In fact that is an APR of 4214% which is huge. It may seem easier and quicker to do this than organise an overdraft with your bank, but it could be well worth all of the hassle.

Also if you do not manage to pay back the loan in time, those expenses will accumulate. Imagine if you deferred payment of the £200 for 4 months, then you would owe more than double (the original £200 + 4*£66 = £464). It is only when you do this sort of calculation that you realise quite how expensive it is.

It might be the only solution for you, but make sure that you pay back the loan as soon as you can and that you have looked in to every other option first. These are really only meant to be for emergency cases and can lead to people getting in to a lot of financial trouble as the debt can build up so quickly.

Many people even think they should not be allowed. However, as long as you are intelligent and know exactly what you are getting in to then they should not be a problem for you. Just be wise about the costs and the long term implications of those.