Short term loans are available to consumers that need access to a small amount of cash relatively quickly. One of the most common types of short-term financing is payday loans or title loans. While these are convenient, they are usually not the most affordable financing option. Consumers need to be careful about where and how they get the money they need.
We put this guide together to help families get the money they need quickly without having to pay additional fees or outrageous interest rates.
This guide covers the basics of short-term financing including:
- What are Short-Term Loans?
- Where is Short-Term Financing Available
- Getting Approved for Provisional Loans
What Are Short Term Loans
Short term loans are generally available up to $25,000 and can be repaid over a period of 3 or 5 years. Many people use short term loans to cover any unexpected financial obligations such as medical loans, lawsuit loans or even wedding loans.
The advantage of short term financing is that the money can be transferred directly into a bank account. In addition, the payments can be set up to be automatically withdrawn each month from the borrowers account.
In most cases temporary loans can be repaid in advance without a penalty. This can save a borrower hundreds of dollars in interest charges over the life of the loan.
Where are Short Term Loans Available
Fortunately for borrowers financing is available from a number of sources. However, there are many lenders and short term financing options that many consumers need to be wary of.
Two of the most common types of short term loans are payday loans and cash advances. These services offer short term cash up to the amount of a borrower’s monthly paycheck. Usually the interest rates are high and the penalties steep.
Payday loans are popular because of their convenience and broad appeal. In fact, there are usually these types of lenders located in near most major malls and shopping areas. However, just because it is convenient does not make it a smart financial choice.
Another popular source for short term financing is available online from peer to peer lending sites. Peer lending has gained enormous traction recently because of the low interest rates, easy application process and great customer service. Loans are available in one, three or five year repayment terms.
Peer to peer lending sites connect borrowers and investors online. In contrast to a traditional bank loan or title loan they offer unsecured personal loans that require no down payment or collateral.
Investors choose to fund these unsecured personal loans because they can receive a higher rate of return with online investing in comparison to more common investments. While investors enjoy the great returns, borrowers also get to take advantage of low interest rates because of the lower fees associated with peer to peer lending.
Getting Approved for Short Term Loans
Getting approved for a loan is much easier than more traditional financing options. In fact, sometimes it only takes a signature to get approved for a short-term financing. For payday loans and title loans the loan amount is guaranteed and the approval process is quick.
Other short term loan options like peer to peer lending have stricter approval requirements. For example, most social lending sites require borrowers to have good or excellent credit. Most financial experts agree that a credit score above 680 will give consumers a better chance of getting approved for financing at low interest rates.
See also: What is a Good Credit Score?
If credit problems are affecting a borrower’s ability of getting approved for financing they may want to consider bad credit loans. These are personal loans available to consumers with bad credit but are offered at higher interest rates. While this may not be the ideal situation for families to be in, sometimes it is the only choice available when money is tight.
Short term loans are more common than ever before. Borrowers are encouraged to take their time and do research before applying for financing online. There are many great options available from peer to peer lending sites and even payday lenders.