Short Term Loans
Short term loans are loans whose repayment period is less than one year. People apply for these types of loans to meet urgent obligations. In case you do not qualify for bank loans to finance your projects, you can still succeed in your ventures by applying for short term loans.
The interest rates for short term loans are higher than with long-term loans. This is mainly because the lending institutions have to make money within a short period. In addition, the maximum amount of short term loans is low. However, this depends on the lender. The maximum amount will vary from one lender to another. It is important to repay such a loan promptly to avoid penalties and accumulation of repayments. Most short term loans are borrowed for a period not exceeding six months.
Sources of short-term loans include:
a) Family and friends: Depending on the financial muscle of your friend or family members, you can borrow considerable amounts of loans to finance your business ventures. However, the two parties concerned must reach an amicable agreement to avoid possible conflicts. The agreement should be adhered to by all parties.
b) Banks: Most people turn to banks to get short term loans. However, their interest rates are high.
c) Credit unions: They offer loans at high interest rates.
d) Online lenders: The applications involve filling online forms. Usually, the loan is approved within hours.
Examples of short term loans include:
Pay day loans
These types of loans are best suited to those who have bad credit and need urgent cash to solve a crisis. However, the payday loans have a higher interest rate than other types of short term loans. Everyone who is employed can qualify for payday loans.
Emergency cash loan
Emergency cash loan is given to those who require immediate cash to meet instant expenses like hospital bills, and other unpredictable occurrences.
These types of loans can be offered by banks or credit unions. Usually, credit unions approve more emergency cash loans than banks because their terms are less strict.
People use credit cards to get cash advances. Some banks offer credit advances at their arms provided the amount does not exceed a set limit. Cash advances can accrue a considerable amount of interest. This type of short term loans may prove quite expensive. It is better to try other forms of short term borrowing.
These types are meant for personal use. They also come with high interest rates. The maximum amount you can borrow is also small and can only be given for a short period of time.
Advantages of short term loans
They often do not need collateral security.
The funds are availed within a very short period of time usually a few days or hours.
They are easy to get
They help to solve unexpected problems such as hospital bills, car repairs, etc
Disadvantages of short term loans
They are usually more expensive than long term loans. The interest rates are also higher.