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.
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.
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.
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.
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.