Short term loans – loans can be classified into several categories.
There are secured and unsecured loans, including pay day loans. Secured loans require collateral or a guarantor. In some cases, a cosigner can work as the guarantor if there is no asset to use as collateral for secured loans.
Unsecured loans don’t require any collateral but there could be other qualifying factors. With secured loans, an asset or the collateral is not the only criterion.
An Introductory Guide to Short Term Loans
Both secured and unsecured loans can be short term or long term. Mortgages are typically long term secured loans. Student loans can be short term but they are usually long term loans. Student loans can be secured or unsecured.
Business loans and personal loans can also be short term or long term. It is the duration that determines short term loans but what is short enough is purely subjective.
Banks and financial institutions consider twelve months or twenty four months as short term loans. Five years or longer repayment periods fall in the category of long term loans.
There are lenders and borrowers that would consider five years loan terms as medium term loans. Car loans typically have three to five years terms.
Depending on your needs, a six month repayment period to three years or so would be short term loans. There are loans that require you to make one lump sum repayment. Such loans don’t fall in any of the discussed categories.
Other than the repayment periods, there is hardly any difference between a short term loan and a long term loan. It is possible to stretch the repayment periods of typical short term loans and to have a longer term.
It is also possible to reduce the repayment periods of typical long term loans and to payback much sooner.
Five year mortgage terms or pay day loans with three year terms are not unheard of. Eventually, it boils down to the exact loan that you would opt for and what your lender is willing to offer. Banks and financial institutions have the discretion to offer you the right to choose a repayment period.
With un-institutionalised lending, you get fewer options but you can still work out an exact repayment period depending on your needs.
A short term loan has the same kind of liabilities and benefits as a long term loan. Whichever type of loan you opt for, the pros and cons will apply regardless of the repayment period.
Where to Find a Short Term Loan
There is an array of lenders offering a short term loan. Your needs and eligibility will determine the short term loan you need and accordingly you would be able to choose a few lenders.
In the same vein, many lenders will become irrelevant for your quest. For instance, if you have excellent credit, if you have a very well defined purpose for the short term loan and your financial profile is desirable then you can opt for just about any bank or financial institution in the country.
Should your credit history be less than desirable, the purpose of your short term loan be vague or not anything specific that can be vetted and if your income is not as desired by the banks or financial institutions, then you would have to look for alternatives.
Fortunately, there is space for all kinds of lenders and you can find more than one option given your eligibility, needs and financial profile.
The following are just a few ways you can go about finding short term loans.
Banks and financial institutions have well defined loans. You can only opt for a loan if you have a specific purpose, from home to car, business to funding education.
If you need money for an array of reasons then you need to opt for personal loans. Personal loans can be secured or unsecured and they will require you to have a good credit score.
Personal loans usually have higher rates of interest and you may opt for a short or long term. Most personal loans are long term loans; that is you get to pay over a period of three to five years.
If you need a short term loan, typically with a three month or twelve months repayment period, then you need to opt for private lenders who work in accordance with banking regulations. Banks have short term loan options but they aren’t many.
You could opt for pay day loans, title loans or peer to peer lending networks. There are loan sharks who would offer you a short term loan, but we would not advise exploring that option at all.
These options are your only resort if you have bad credit or if your application gets rejected by most banks.
Short term loans makes more sense for small loans because you don’t want to stretch the repayment period and thus end up paying more interest.
Hence, these are your more relevant options.
Obviously, with a short term loan you would be paying sooner and thus you would be paying more every month as compared to the same loan amount as a long term loan. See also Best Short Term Loans Lender Options To Choose.