Short term loans are loans whose terms are relatively short. Usually, such loans are scheduled to be paid back in less than a year. This type of loan has some unique features. Furthermore, the amount involved in this loan is generally small when compared to other types of loans.
In most cases, short term loans are quickly funded but the name actually implies that the loan is quickly paid off. The loan matures pretty quickly between 3 and 18 months. If the loan’s repayment term exceeds this duration, the loan will be referred as medium term loan or long term loan. In general, such loans may be referred as non-short-term loans. In general, the feature shared by all short term loans is that they have short repayment term but they loans could have different features and come in different forms. Examples of short term loans may include payday loans, merchant cash advances, lines of credit, invoice financing, and so forth.
Although short term loans generally involve lower amounts of money, they have some interesting benefits over a longer term or non-short-term loans. Some of the benefits are shortly outlined. • Short term loans generally have a lower cost of capital. The total interest accumulated by short term loans would be lower as compared to longer term loans. • Short term loans are usually funded within an hour. The main reason for this quick funding is usually because of its less thorough and tedious underwriting process. Moreover, short term loans have a much less tedious application process and less paperwork. • Furthermore, short term loans are comparatively less risky than longer term loans for the lender. In general, the shorter the term, the less the risk the lender will face. • One reason why many borrowers opt for short term loan is that it is easier to qualify. Its accessibility makes it super-easy for anyone to leverage this type of loan.
Short term loans are not all rosy, they also have their downsides. You need to consider the downside to determine if this type of loan is appropriate for you. • Obviously, short term loans involve smaller loan amounts, especially when compared to loans with longer terms. This means that this type of loan is only recommended in emergency situations when you have to pay for the rent, utility bill, medical expenses, car repair, etc. • Short term loans are always paid back on monthly basis. Since the loan has a short term, there are no such options as weekly or daily payments to completely repay the loan. • Short term loans are not easy to get sometimes. Payday lenders run credit checks and if customer has a bad credit they will not get the loan. • Generally, short term loans may involve higher payments compared to loans with longer terms. In other words, you don’t just have to repay frequently, you also have to stash out higher amount to really be on schedule in repaying the loan. Annual percentage rate of short term loans is very high and can be up to 1500%. In conclusion, short term loans are an excellent type of loan to finance emergency activities or urgent in your business but they may not be appropriate for major projects.
We're an introducer to Monevo and not a lender. Rates between 9% APR and 1294% APR - your no obligation quote and APR will be based on your personal circumstances. Monevo compares short term loans from over 50 lenders to get you the best APR possible for you. Loan term lengths from 3 to 18 months.
Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk