Whenever you need cash right away, what do you do? Some people consider pulling money out of their savings, and others prefer borrowing money from friends and family. But what if you don’t have any of these options? The answer is short-term loans! As the name suggests, these loans solve short-term financial difficulties. They are the best debt instruments to prevent short-term money problems from converting into long-term problems. This is because these loans are approved and transferred to the borrower within one day. They are easily accessible and offered without credit checks. However, the catch with these loans is that they are provided at a higher interest rate.
How Can These Loans Be Helpful to You?
An important advantage of these loans is that they get your hands on cash much faster. A lot of times in business or personal lives, people have to pay for things that happen without warning and for something like that, these loans are the best resort to take. They do not take long to process; these are approved and transferred in less than 24 hours of your application. For this reason, most businesses opt for these loans whenever they need cash right away to make immediate payments. As such, they can get you the funds you need and get your business moving without any delay.
As said, such a loan is the only way to get the money you need fast and without worrying about exorbitant fees. According to experts, taking a short-term loan is more lucrative than a long-term loan concerning the fees you pay. This is pretty obvious that the longer you drag out a loan, the more fee you will pay. And even though rates are higher in the case of these loans, you still pay far less than what you pay for long-term loans. You get the short ones paid off quicker, which makes the difference. So if you don’t want to spend a lot of fees, applying for such a loan is the way for you.
Besides this, people also prefer these loans because you do not have to have a credit history when applying for them. When you opt for a long-term loan, the lender checks your credit history, and your application may get rejected if it is not appropriate. However, in the case of these loans, you don’t need to worry about it, even if your credit score is poor. In fact, if it doesn’t exist, you can build it with the help of such a loan.
The Important Things to Know
- Collateral considerations: Such loans are meant for a smaller amount, so you don’t need high-value collateral. A large loan with short repayment terms is considered unsecured, or if they require collateral, the item used can be lower in value.
- Interest rates: The interest rate you will be paying depends on the amount you borrow, for how long you are borrowing and whether or not collateral is used to guarantee the repayment.
- Repaying the loan: Even though you have less number of payments for a short-term loan, you must make them in full and on time. Missing loan payments can harm your credit score, just as it does for long-term loans,
After going through this article, a common question that might be swirling in your mind is ‘how short are “short-term loans”?’ Well, the repayment term of these loans can vary greatly, though in general, any short-term loan is expected to be repaid within a year of being taken out. Meanwhile, most of these loans are for six months, though three or nine months are also common.