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Why Should You Consider A Short Term Loan?

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A short term loan usually needs pay back with 90 days.  The repayment date is sometimes on your next payday. Such loans need quick repayments so they are provided in small amounts. But due to the expenses related to availing a short term loan, anyone considering it needs to be careful.

Flexible:

You can apply for a short term loan any time. Many online options are available nowadays that will let you apply for the loan from your home. You do not have to visit a bank or any lender’s office during the working hours. It will thus offer great personal help and also add financial support to individuals who survive through one paycheck to another. The deposited loan amount can be used any time you want from your bank account.

Less Rate Of Interest:

If you take a short term loan, you will see that the rate of interest is less as the time needed for repayment is the least. If you extend the tenure of repayment, your lender will be adding extra money for loan repayment. You might be incurring high charges. But that will be for a shorter time instead of incurring lower charge for a long period. So if you apply for a short term loan in any long run, you will be saving more money compared to that during a long term one.

Improves Credit Rating:

Taking a loan will help you in building a credit report. You need to pay a loan timely in order to make sure that your credit score is good. The wonderful thing regarding a short term loan is that it will improve your credit rating. It will aid you to get long term loan in the near future. Small business or an individual with a not so good credit score face difficulty to obtain a long term loan. So pay off a short term loan well and build a great credit score with the lender. Then you can again apply for a larger amount and may also be able to avail a long tenure one.

Helps To Get Fast Money:

A short term loan will take lesser time to get processed compared to a long term one. If you need some quick cash, then you must apply for this type of loan. These days it is very easy to apply for a loan online by accessing the internet. If you apply for a short term loan online, you will be getting the money without facing long queues at any bank and on the same day. The approved loan amount will be deposited into your bank account and thus you will have instant access to it.

Expands Business:

If as a small business owner you wish to grow your business then there will a lot of expenses. This is because you need to acquire a larger office space, buy extra warehouses for inventory and opening any new location. Such expenses will be huge and you will require extra funding. The amount that you will obtain from a short term loan will support you in buying whatever you require without being worried about it.

Keeps Emergencies Under Proper Care:

No one can plan for any emergency. An emergency can come out of anywhere and can be harmful for your personal life and business. The best way anyone can prepare for any emergency situation is by having insurance. A great form of insurance is a short term loan as you can quickly obtain it. Urgent flow of cash can be generated by taking a short term loan. Mostly this type of loan will help you in availing an amount of $6000 to $140, 000. It provides the required funding to take proper care of any emergency that suddenly arises. You can use it for servicing your crashed computer or during any natural disaster. Medical emergencies too can be managed with the help of a short term loan.

Predicts Financial Ability:

A short term will aid you in evaluating your financial potential. You will be able to understand if you can manage to clear off the loan on the specified time. If you take a loan that you need to pay off after 20 years, then you cannot ensure where you will be during this repayment tenure of 20 years. But if you take a short term loan, it will be easier for you to predict what your financial state will be in a short time instead of in any extend period. So it is better to take a short term loan that can be financed and predicted by you.

Hence there are many reasons for considering a short-term loan rather a long-term loan. But you need to ensure that you exactly need it for yourself or your business requirements. Consult a financial advisor who will give you well regarding a borrowing of a short term loan.

 


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How To Pay Off Debt On A Low Income

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he tips on how to pay off debt on a low income will help you live within your means and live comfortably. Paying off debt on a low income can be difficult especially if your income to debt ratio is really unbalanced. If possible, consolidate your debt, particularly if you have high interest rates from several different lenders.


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What Is A Short Term Loan?

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A loan that is needed for supporting temporary personal and business capital requirement is known as a short term loan. It includes one borrowed capital amount as well as interest that should be returned or repaid at a specific due date; within a year after getting the loan.

What Are The Characteristics Of A Short Term Loan?

This type of loan is named so as how fast it requires to be cleared off. In most of the cases, a short term loan must be repaid within 6 months-1 and ½ years. A loan that lasts for a longer term than it must be considered as a medium or long term loan.  Some of the short term loans are seen not to specify a schedule for payment or any particular due date. It lets the borrower pay off the loan at their own momentum.

What Are The Types Of A Short Term Loan?

Short term loans are available in different types. They usually have a short maturity period. Colleges offer short term loans to their students in order to aid them in financing their studies. Such loans must be cleared off in about 2 months or so. It depends on those terms which have been set by the institutions. Maturity date of the loan will be depending on several factors like the borrowed loan amount as well as the student’s financial situation. Companies, businesses, colleges along with individual borrowers are offered short term loans by financial institutions. The loan needs to be paid back over short time duration mostly less than a year. There are some short term loans that come with 3 years tenure. It depends on the borrowed amount and the contract that has been signed by a lender and a borrower. Payday loans are mostly unsecured and consist of a substantial rate of interest. In a short term loan small loan amounts for instance between $40 and $200 are usually loaned. But there are some companies that will offer short term loans of $1000 or more. If a loan amount is paid off completely and timely, a borrower should not worry about paying any high interest. There is a huge range of short term loans with various characteristics, fees and terms.

Payday Loan:

It is the most common type of short term loan. It will provide cash to the borrowers when they wait for their next payday period. The only requirement for applying for a payday loan is to show a payment stub in order to prove that you are employed. It will need a prompt pay back which is mostly as soon as the next paycheck is cleared. Some of this short term loan comes with too much APRs as well as fees.

Bank Overdraft:

During emergencies, a bank overdraft will be beneficial. The bank will let you draw out huge money from your account than whatever is available. This additional money will aid you to take care of the emergency easily.

Money Marketing:

It is basically advances made among banks and the budgetary firms. Organizations that have surplus assets will be providing loan to those who need it. The loan repayment has an expected tenure.

Credit Card:

A credit card will aid an individual to acquire any product and service on credit. It also has to be paid off within a fixed time period.

Car Title Loan:

It is a short term loan better known as auto loans. An individual can borrow a loan of amount $200-15,000 and it depends on the car’s model and brand. Since this type of short term loan is properly secured by car title, rate of interest can be lower significantly compared to that of the payday loans. But its rate of interest is quite high in comparison to the other long term ones. It being a secured loan, the lender will never need any credit check. Within a short time, the loan applications get approved. Thus it is alluring to people who are in need of urgent cash. If timely payments are not done, high interest will be incurred.

How Can You Secure A Short Term Loan?


A short term business loan depends on an individual’s credit history along with the repayment capability of his business. Such variables will be affecting some conditions such as the rate of interest, date of repayment as well as related fees that are attached to a short term loan. A short term business loan can extend till 15 years. But lenders usually provide shorter loan terms to new and unproven businesses. This type of loan is typically used for paying off the emergency financial commitment of a business.

Emergencies will be always there around us. It depends on a person on how he will deal with them when they take place. A short term is very helpful. So whenever any financial emergency arrives, consider applying for it after ensuring that you can pay off the borrowed amount timely.


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Risks Of A Short Term Loan

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A short term loan can really present itself as a light at the end of a tunnel to those who are struggling to borrow some money but also in need for some quick cash because a it is known for their relaxed documentation and ease of getting the money.

Hassled Renewals:

Sometimes some extra time is required to pay off a payday loan, and in those situations, the lenders renews the contracts on his terms making it more difficult for the borrowers. But the borrowers in any case remains powerless while this renewal of the new repayment plan and has to agree to it although there are chances that with the debts getting accumulated the person or even a small businessman can get in the perils of bankruptcy.

Loss Of Possessions:

You can keep your car as a collateral for a short term title loan in a hypothetical situation but it should be kept in mind that the lender has legal rights to take over the possession of that car should you default on the payment of the loan. According to CFPB, when a lender takes over the possession of your asset, the car in this case, you can’t drive yourself to work, which will increase your expenses and will ultimately affect you while repaying the loan. They also released a stat which said that approximately 22% of auto loan installments get defaulted and then lenders takes over the possession of approx. 8% of those cars. Again, in the case of a pawn loan, even if you risk losing the collateral, you can still walk away from it pretending that nothing has happened. So pawn loans are always considered as a safer alternative than the high stakes short term loans.

Risk Of Damaging Reputation:

Investors may shy off from providing your company any short term loans if your company has financial woes previously or if they find it to be extremely reliable on such loans. The factors like the assets of the company always lying as a collateral often signifies that the business is on the edge of falling down and so in order to successfully on board the investors to invest, you need to show them that the business they are planning to put money is indeed financially sustainable and stable. Apart from that, the procedures of dealing with the short term loans affects the financial security if there is a chance of opting for a long term loan and any defaults while paying them back puts a stain on the credit score and makes it even more difficult to get a borrowing from any reputable institutions dealing with lending business.

Refrain From Digging Too Deep:

Most people thinks about getting short term personal loans to help themselves to pay unforeseen expenses like car repair, hospital or medical expenses or for a business purpose. But it is advisable to go for such short term options only if you are confident enough to pay it back on time and as quickly as possible as these kind of loans comes with an exorbitant interest rate which will result in putting you in more debts than what you had before. So even if you sometime fall in such situations which demands some quick cash its always justified to explore other options before jumping on short term personal loans because it’s totally unwise to get one without being entirely sure of paying it by its repayment terms.

Less Amount Of Money:

Traditional loans are usually much bigger than short term loans and the amount you are intending to borrow must be trivial enough so that you are sure of paying it off realistically within a few months’ or years’ time frame. So the purpose of borrowing it can be to cover some minor gaps in the ledgers, but taking it for replenishing your business inventories or for the production of something before deadlines can increase the risk factor exponentially.

Risking Bank Accounts:

Short term loans affect the financial security of an individual or a company like the fall of a single domino block. If one block falls down it crumbles the entire chain one by one. It not only lies as a trap in front of the borrower threatening his financial security but it has its other devastating effects that are much more far reaching which engulfs the whole life of the borrower. In order to get a payday loan, you must hold a bank account and the lenders takes access of the bank accounts to withdraw their payments usually through a pre dated cheque which they take so that they can encash if not paid. This leads to overdrafts, cheques getting bounced and ultimately the accounts getting closed, all of which doing one common thing, doing a major damage on your credit score and if worst case situation arises, the borrowers ends up announcing bankruptcy.

So it can be said that though short term loans seem tempting to squeeze in a quick cash inflow but the undermining risks associated with it demands that you should do proper research before opting one.


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