What is Short Term Loans: Applying for a business loan should not be taken lightly. Depending on your business’s financial need, a short term loan can be an attractive option. With a short term loan, you can take care of your urgent credits need without having wait for your salary. For example, if you want to repairs a car or want to buy a new smartphone, then a short-term loan may be a good solution for you. A short-term loan can help you maintain a healthy financial status. Today, we will discuss all about what is short term loans and its advantage & disadvantage.
What is Short Term Loans?
A short term loan is a type of loan taken for temporary personal or business capital needs. Basically it is a small amounts of money that are to be repaid over a short period of time. Short term loan is a unsecured loans, meaning that you do not need to secure your loan against your home or car or any other property. If you take a short-term loan, you have to pay the lender the same amount every month until the loan and interest are paid off.
Features of Short Term Loan
There are some of the key features of short-term loan mentioned below –
- Short term loan is very helpful for businesses and individuals.
- A short-term loan can help you maintain a healthy financial status.
- It is a type of loan taken for temporary personal or business capital needs.
- The loan tenure varies based on the debt type.
- The annual percentage rates (APRs) or the interest rates are normally set high.
- It is a unsecured loan, meaning that you do not need to secure your loan against your home or car or any other property.
Advantage & Disadvantage of Short Term Loan
Above we learn what is short term loans, now we will discuss about advantages & disadvantage of short term loan –
- Short term loan approval and funding times are quick.
- This loan must be paid off between 6 to 18 months.
- The disadvantage of this loan is that they provide only smaller loan amounts.
- The annual percentage rates (APRs) or the interest rates are normally set high.
- Due to unsecured loan, those with low credit score often struggle to acquire funds from reputable sources.
Types of Short Term Loans
There are various types of short term loans available in the market which are listed below –
- Lines of Credit:- It is a type of loan wherein a bank or financial organization sets a maximum loan amount amount that an individual is allowed to borrow. It makes monthly installment payments against whatever amount has been borrowed.
- Payday Loans:- It is one kind of emergency short term loans which is easy to obtain. This types of loans come with unreasonably high interest rates.
- Online or Installment Loans:- This types of loan can be taken online by filling an application. After getting approval, the money is wired to the borrower’s bank account within minutes.
- Bank Overdraft:- This is one of the most common types of credit facilities under which, if the bank account holders have enough money over the amount they are trying to withdraw, the bank will pay the balance.
