Well, to say that life’s full of crests and troughs would not be an overstatement. A lot of us have this habit of going on a shopping spree the moment our salary gets credited. On the other hand, spending lavishly can end up creating a hole in your pocket. In all fairness, the end of a month happens to be quite a challenging time if it is looked at from a salaried employee’s perspective. There are times when you need access to ready cash in order to meet your family’s needs. Under such circumstances, a severe dearth of cash resources can make life difficult.
If you, like many others, are going through a lean patch held back by financial constraints, then getting a short-term loan for a facility is perhaps the best way to fulfil your daily cash requirements.
What is meant by a short-term loan?
Short-term loans, in the simplest of terms, are the loans that are supposed to be repaid within a year. Unlike other types of loans, these are not bound by a specified deadline.
As a part of this setup, a borrower is given the amount in lump sum. The borrower has to return the borrowed amount along with the interest within a year. Instalments can also be paid on a weekly basis. A small drawback you may incur is the rate of interest would be higher.
Apart from households, a short-term loan can also be considered by small businesses and start-ups that are not eligible to avail bank loans. A short-term loan allows you to borrow small amounts (say anything from $100 to 2,000).
The merits of it
- They are foreseeable
- Quick funding
- Minimal paperwork
- Easy to avail
Now, the flipside
- The interest rate is high
- Late fees can also be charged
- At times, it can be extremely difficult to pay instalments weekly
Different types of short-term loans you can avail
1)Line of credit
It’s quite similar to a credit card used by a businessman. There’s a predefined credit limit and the borrower can use these funds as and when needed. Monthly instalments are made against the borrowed amount. In this case, the monthly instalment you pay would most likely vary because the amount you borrow each month would be different. A striking feature of this kind of credit is a low Annual Percentage Rate (APR).
2) Cash advances by the merchant
These kind of loans are like an advance cash payment. The lender provides the borrower with the amount he wants. Under this setup, the repayments are made by the borrower when an access to the borrower’s credit facility is given to the lender. This means that whenever a customer of the borrower makes a purchase, a certain share out of the earnings goes to the lender.
4. Instalment loans online
Applying for an instalment loan is quite simple. The documentation bit is carried out online. Everything, right from filling the application to getting the approval is carried out online. The amount of the loan gets transferred into your account almost immediately after getting an approval.
3. A payday loan
These are short-terms loans that are availed in order to meet the contingency needs. Perhaps, the easiest thing on earth is to obtain a payday loan. You might come across a number of lenders offering you payday loans. A downside of availing these kinds of short-term loans is: The rate of interest is high. Also, the principal, along with the interest, needs to be repaid in lump sum. The lender generally takes out the entire amount from the borrower’s account when the borrower’s payday arrives. A borrower can write a post-dated cheque in favour of the lender.
5. Invoice financing
Invoice financing can be done by putting your customers’ unpaid invoices to use. The unpaid invoices given by customers are used as the collateral. Repayment is simple. Interest would be charged for as long as the invoices remain outstanding. When the payment is made by the customer, the lender would deduct his share (interest included) and return the remaining money to the borrower.
So there you have it, that was a sneak-peak into the various kinds of short-term loans that can be applied for by you. Each type of loan has its own set of merits as well as demerits.