What shouldn't a short term loan be used for in the UK?

Plenty of people depend on short term loans to keep their heads above water when times get tough financially. These alternative credit options have been exceedingly helpful for those in a tight spot, most notably over the past few years during the global recession.

As many people across the United Kingdom found out, high street banks closed their doors and tightened their purse strings to everyone who wasn't a sure thing in terms of their consumer credit scores. However, smaller lenders, like those offering short term loans, came to the rescue.

Luckily, the economy is becoming stronger and stronger, although its recovery is slow going. As such, people still need access to money when unexpected expenses arise. But it's important to note that these are the only times during which lenders should give out loans - when consumers need them because a surprise drain on money came up. Reputable companies already know this and follow this best practice to the letter of the law, but it's important for employees to brush up on their knowledge of when someone should and should not be given a loan.

So, when are some times that lenders should take a second or third look at the application that explains the reasoning behind a potential borrower's request?

Everyday costs
Short term loans should never be used if the consumer needs extra money for things that he or she normally pays for. As AOL Money pointed out, this is currently the most popular reasoning for taking out a loan in the U.K., according to the Institute of Public Policy Research. However, covering costs like gas, electric, groceries and other expenses shouldn't be a good enough motivation.

Using loans to pay off predictable expenses "shows that it is not a financial planning problem they face," according to the news source.

Holiday splurges
Though most consumers and lenders are well aware of this, short term loans shouldn't be used to cover splurges or expenses that aren't explicitly a necessity.

The Leamington Observer reported that some people are tempted to use alternative finance options to make sure their loved ones receive gifts they deserve around the holidays or for other special events. This issue came up recently during the winter holiday season, the newspaper explained. A number of individuals took out loans because they wanted to finance Christmas, but not only was that a luxury, the holiday wasn't unexpected either.

As long as consumers and lenders remain on the same page at all times, everyone should be happy at the end of the day.