Could a short term loan benefit your finances? No matter how you manage your finances, there are times that you may be needing extra cash for unexpected expenses.
During these crises, getting a short-term loan may sound a good option. It’s a quick way to get the cash you need since lenders providing it only look for simple requirements.
If you’re considering getting a short-term loan, you’ve arrived on the right page. In this post, you’ll learn how it can help you get a quick fix for your financial hardships right now.
What is a short-term loan?
When looking to apply for a personal loan, a short-term loan can be a great option. This is the loan that you have to repay in less than a year including the loan amount, interest and fees.
It is the best solution for people who face a sudden expense that they cannot avoid. It is also useful for those who have irregular jobs and needed a quick fix until their next paycheck.
Short-term loans are also called unsecured loans because you don’t need a collateral to get approved on your application. In short, they are only considering your creditworthiness as a borrower.
Features of short-term loan:
- Smaller loan amount. Shorter loans are usually smaller when compared to other types of loans.
- High annual percentage rate (APR). Oftentimes, it comes with steep interest rates.
- Unsecured. It’s unsecured since collateral is not needed in the application.
- Fast repayment. It is usually due on the borrower’s next paycheck or can be done weekly or monthly.
Different types of short-term loans:
- Payday: The borrower pays the whole amount of the loan on their next payday. There are online as well as traditional lenders who offer this loan. Repayment is automatically taken out from the borrower’s bank account.
- Online or instalment: The entire application is done online. Repayment is usually less than a year.
- Line of credit. The bank or a financial agency assesses the loan amount that would be given to a borrower on the basis of their creditworthiness.
- Bank overdraft. If a borrower’s account is insufficient to cover any financial obligations or repayments to other agencies, the bank provides added funds. The borrower pays fees for this type of credit.
- Short-term bank loans. The bank provides the loan and is not renewable.
A short-term loan can benefit you with the following:
- Low-interest cost. Since you have to pay the loan in a short period of time, the amount of the interest you’re paying is lower than other types of loans.
- Quick approval. You don’t have to wait for several days or weeks to get approved. The waiting period is just between 24 to 48 hours.
- Simple requirements. You don’t have to feel stressed by submitting many requirements. The lender only asks for the basics before they provide the loan.
- Accessible. Anyone can apply for this loan even people with bad credit history.
- Unsecured. You don’t have to worry about collateral because you can get approved even without it.
- It can improve your credit score. Consistent repayment can help you improve your credit rating.
- Less stressful. Payment for these loans doesn’t take that long. That’s why it is less stressful for the borrower because they don’t have to think about it over a long period of time.
There are many ways that short-term financing can help you. Short-term loans are ideal for people who need quick cash and don’t have a good credit profile. Since it is less stringent, it is easier for you to process the requirements online and get results.
However, don’t forget that since it is paid for a short time, you have the tendency to get into the habit of borrowing. If you aren’t very careful, you may end up with piling debts.
You also have the tendency to overlook the overwhelming interest. Unless you track down your finances very well, you may lose more money than you should be. It’s because short-term loans could mean more frequent payments.