Do you want to know about short-term loans? Are you aware of its benefits and interest rates? From the name, it is quite evident that a short-term loan is given for a short tenure. Generally, the tenure of this loan ranges from 6 months to up 1 year or even 18 months. You can apply for a short-term loan if you are in urgent need of a financial emergency. Apart from that, you can also apply for supporting business capital and other purposes. Mainly, a shortage of cash is the most common reason behind going for a short-term loan. Some common examples of short-term loans are credit cards, trade credit, bank overdrafts, payday loans, and so on. Therefore, the tenure of the short-term loan depends on the debt amount and the debt type. Let’s learn about the features of the short-term loan.
Features of the short term loans
- Short-term loans generally carry a higher rate of interest because of the short tenure.
- Short maturity is one of the advantages of the short-term loan.
- These short-term loans generally offer small loan amounts.
- Short-term loans are mostly unsecured. Hence, banks and other financial organizations do not ask for any collateral as a security for the loan.
- Generally, small business organizations apply for short-term loans when they are in dire need of capital.
Furthermore, people generally use short-term loans for loan repayment. It is also used for credit card bill payments, mortgage payments, insurance payments, foreign travel, wedding, etc.. Believe it or not, these short-term loans are pretty popular among investors and business owners in Australia.
Different types of short term loans offered by lenders
- Merchant cash advances- You can think of it as a cash advance. Here, the lender takes a certain percentage of the proceeding from the borrower’s account directly. This process continues until the borrower pays the loan amount.
- Lines of credit- Here, the lender sets a credit limit on the credit card. In this, the borrower can tap into the line of credit every time they need money. Hence, the line of credit is more like the operation of a business credit card.
- Payday loans- These are actually emergency short-term loans. These easily obtain loans are generally offered by high street lenders. Here, The loan EMI will be automatically deducted from your account when you receive your salary.
- Installment loans- In this case, everything related to the loan is done online. Here, you won’t have to wait for loan approval at all. You have to pay the EMI with interest regularly.
Advantages of short-term loans over other loans offered by the lenders
Short-term loans are quite popular throughout the country for a number of reasons. Let’s learn about those reasons.
- Compared to long-term loans, the interest rate is pretty low compared to short-term loans. The borrower of a short-term loan generally pays the loan amount within a year.
- These short-term transactions are not at all risky. So, the banks and other lenders approve the short-term loans applications pretty fast – bringing in a quick funding time for it.
- These short-term offers of loans are often termed lifesavers. The customers can meet the eligibility criteria of these loans pretty easily. So, compared to long-term loans, the short-term goals are easier to acquire.
Hence, now you are well aware of the short-term loans. So, you should start looking for a good lender that offers attractive deals for your financial needs. Check the interest rates, reputation, customer’s reviews etc. before choosing the lender.