Short term loan acts as a form of the financial ladder which allows reaching the heights that one has dreamed of. This type of loan is meant to fill gaps between payday, especially when you need urgent funds. No matter how many benefits you get but whenever it’s about finance people do get a lot of questions in their mind and it’s quite normal. When it comes to the short-term loans, you may be thinking whether it is safe as compared to another form of loans available or not? Well, these loans are not only safe, but they provide a lot of benefits as well. Most of the loans such as car or mortgage loans are for a longer duration, however, the short-term loans are of short duration which is why whenever you need them, you can get it. In such situations, short-term loans can turn out to be a lifesaver. This type of loans is generally taken by the borrower when they have the intention to pay it back within the provided time frame.
Different Types of Short Term Loans?
Based on borrowers’ need, this kind of loans is divided into various forms. Some of them are enlisted below.
- Unsecured Loan: In this form of loan the borrower does not have to provide any sort of assets such as house or car in the form of collateral. Therefore, its eligibility is quite stricter as compared to other types because in case the loan becomes the default, the lender would be at a huge risk. This type of loans is offered with a minimum tenure of one year.
- Payday Loan: This is one of the most popular forms of short-term loans that are designed for those who can repay it with their next salary. Agreement to such type of loans is primarily dependent upon your financial condition, salary and even on your poor credit scores.
- Secured Loan: In this type of loan, the borrower must agree to allow the bank to take away all the assets such as car or house if the borrower is unable to repay the loan. Though these loans pose minimal risk for lenders, yet they are quite risky for the borrower, as you might end up losing the security if the loan is not repaid on time.
Various Benefits of Short Term Loans
Besides the different types, there are certain benefits of counting on short term loans and some of them are:
- Varied Amount of Loan: The borrowed amount can be anything. Such kind of diversity has never seen in any other type of loans which also makes it a better option when it comes to short-term loans.
- Short Terms of Repayment: This is regarded to be one of the finest aspects of the loan. You can repay the debt as soon as you can, and this can significantly reduce the interests involved.
- Restricted Fees and Rates: If you are planning to opt for short-term loans from credit unions or bank, you can take advantage of their restricted fees and rates.
Why Do You Need Short Term Loans?
This type of loans is required in various situations such as:
- Pay for holiday or shopping: There are times when you would need to move away from the bustle of everyday life and at times this cannot happen if you are out of money. If such a situation occurs, you can plan a budget, seek short-term loan accordingly and repay it in a timely manner.
- Cover expenses until the payday: When you can’t manage the expenses of the month effectively and left with no money at the end of the month, short-term loans come in handy.
- Pay forgotten or unexpected bills: At times, bills tend to pile up and at last, you must pay all of them at once. Such situation can make you financial weak. However, by taking short-term loans, you can come out of such mess and once you get your salary, you can pay them back.