With short term loans, there are different types of loans for different needs. The one thing they all have in common is the need for speed. These loans are designed to meet the demand of people who require $100 to $10,000 within a day or two. Something most traditional lenders aren’t equipped to handle. Like any other type of financing, short term loans have their own set of pros and cons. Here’s what anyone interested in taking out a short term loan should know.
Short term loans are defined by the duration of the loan. Loans that take between a few weeks to 18 months are considered short term loans. A loan that takes longer than a year-and-a-half to pay off becomes medium or long-term loans.
The money that is borrowed in a short term loan can be used for either personal or business purposes. This makes short term loans a popular option among startups or individuals unable to obtain traditional financing.
There are several different types of short term loans. The one thing that they all have in common is that they are to be paid off in a short amount of time. Here’s an overview of the various kinds of short term loans.
Payday loans are for emergencies when you need money very fast. They are very easy to get and the sum of the loan plus interest is due on your next payday. The money is simply taken out of your bank account on the day you get paid.
Merchant cash advances are loans in which a business owner borrows money and pays it back as a percentage of every sale they receive until the loan is repaid.
Online loans have become very popular within the last few years for both personal and business loans. Both are offered with very fast turnaround times for obtaining capital. There are many viable options when selecting an online lender, but it is recommended to make sure the lender is licensed to do business in their state.
When compared to other financing options, short term loans have a number of compelling advantages. First and foremost, the approval times are fast, which means the funds are distributed very quickly. This makes short term loans a great option when you can’t afford to wait for the approval process of a bank.
When approved for a payday or title loan at a store, you will have the choice of receiving your funds in cash or deposited into your bank account.
Another advantage that short term loans have over more traditional financial products is that you don’t have to submit to a traditional credit check to qualify. These loans were designed to serve customers or businesses that require cash more quickly than banks are willing to accommodate. The removal of the credit check for these loans also makes it possible for those who are turned away by banks to access credit.
Short term loans either rely on collateral or they charge higher interest rates to provide the unsecured financing. By forgoing traditional credit checks, you will need to use something as collateral or plan on paying a higher fee for the loan. In some short term loans, that collateral could be a valuable possession such as in a pawn loan. It could also be the title to a vehicle, which is the collateral that’s used to qualify for title loans.
One thing that you should watch out for when evaluating lenders offering short term loans are their interest rates. The biggest risk associated with short term loans is the interest rate of the lender. If you’re new to a certain type of loan, make sure you do your homework by comparing the interest rates of lenders. Just know that you will pay more for this type of loan than a traditional long term loan from a bank.
It is also highly recommended to use a lender that is licensed by your state. That way you can ensure the lender has been properly vetted by your state regulators. It also provides you with someplace to go if you have any issues with your lender.
There are some truly extraordinary lenders out there offering short term loans, just keep in mind the pros and cons listed here. You can have a great experience when you find the right one.
If you are looking for a short term loan, Lending Bear can help! Simply visit your nearest Lending Bear branch or apply online today to speak with one of our friendly and professional team members.