What You Need to Know About Short Term Loans
Whether it is for personal use or for your business, a short-term loan is a widely used financing option. There are so many reasons why a person have to borrow money. Before you decide to apply to a lending company for one, it is essential that you are knowledgeable of the usual terms and conditions so you know that to expect and you can determine if this is the most suitable funding option.
What is a Short-term Loan?
A short-term loan is a financing type where you borrow money and you pay the full amount along with the interest in less than a year. A short-term loan is different from the kind of loan that you get from the bank where you have the option to pay it back for years. Short-term loans are also known as payday loans.
If you need cash advances, this may be the best option for you since lending companies are not so strict when it comes to the requirements that they need to approve your application.
Do They Check Credit Reports?
Lending companies receive volumes of loan applications a day. They cannot check every credit report for a particular applicant. However, this does not mean that they do not check your credit score. There are some cases where the loan application is denied. Loan providers still have the final say whether they will approve an individual’s loan application.
If you have bad credit, it does not mean that you can no longer get a payday loan. There are lending companies that are not so strict so you can still apply for one. You just have to comply with the requirements that they ask from you.
Types of Short-term Loans
Depending on what you need, there are various kinds of short-term loans.
Payday: This is considered to be one of the most popular type of short-term loan. You have to pay the full amount once you get your paycheck. It is also not that difficult to get a payday loan.
Online Loan: Another type of short-term loan is an online loan. This is almost the same with payday loan. But the difference is that the transactions can be done online. Once your loan application is approved, you can get your money the next business day. There are some lending companies that approve quite fast so you can get your money in minutes.
Doorstep: This is another type of short-term loan where you apply and once your application is complete, an agent will come to discuss the details of the loan with you.
Pros and Cons of a Short-term Loan
Prior to deciding whether to get a short-term loan or not, it helps that you weigh the pros and cons first.
What are the pros?
- It is a bit easier to get a short-term loan. The requirements are not as strict as the traditional loans.
- You get the money in a matter of minutes depending on the type of short-term loan.
- Even if you have bad credit, you can still qualify for a payday loan.
How about the cons?
- The interest rates are much higher.
- You can only borrow the money and pay the full amount in less than a year.
- It is not a long-term financial solution.
At one point in our life, we may have to apply for a loan. But this should not be the end goal as it is very important to strive financial sustainability. Life is never easy, but we can always find different means to earn more money.