Top Five Benefits Of Short Term Loans

Benefits of short term loans

No matter how efficiently you manage your finances there are some unforeseen circumstances in which you need quick funding to fulfil your financial requirements. These emergency expenses can crop up for numerous reasons such as sudden medical expenses, car repairs.

 

Unexpected utility bills or home renovation. Such expenses can cause a pressure on your pocket, disturb your monthly budget and leave you short on money, rent or food. You can take out short term loans to fulfil your emergency financial needs. It is a valuable option especially for startups and small businesses who find it challenging to secure loans from banks or traditional lenders.

Before taking out such loans you may have questions in mind such as what is their purpose, how they can help you and what are their benefits. Read on to find answers to your question and know the top five benefits of short term debts.

Benefits Of Short Term Loans

There are several ways in which you can benefit from short term financing. Five major short term loans benefits are as follows.

Benefits of short term loans

1. Easy Application Process

Many short term finance providers offer easy and quick application processes. You can apply online to take out a loan and complete the process in a short time. This way you do not need to go through the hassle of going to financial institutions or meeting landers in person.

 

Furthermore, you can submit your documents online and do not have to complete lengthy paper works like traditional loans. You can complete your loan application within a few minutes from anywhere.

2. Quick Funding Time

These loans have shorter maturity dates; it is a reason that lenders consider less risky than the long term loans. The borrower’s ability to repay a loan is less likely to change over a small period of time. So lenders take a short time in underwriting and you can get quick approval.

 

If you meet short term eligibility criteria you can even get funds transferred in your bank account on the same day that you apply. You can get fast access to funds after the approval. In contrast you have to wait for weeks or sometimes months to get approval of traditional bank loans.

3. Shorter Time For Incurring Interest

The longer you owe money to the lender the more interest you have to pay. With a short term loan you can get a loan for a small amount of time so there is less time for incurring interest. Although the interest rate of short term debts are higher than the long term loans, still you can save money on interest. In addition, as you pay off the loan amount quickly you can make yourself get rid of the stress that comes from seeing the interest accrue over time.

4. Flexibility And Versatility

This type of financing options offer flexibility in terms of  repayments. Typically,the loan term ranges between 3 to 12 months. Borrowers can choose tenure that suits them the most. Some lenders extend the tenure upto 18 months and some loans such as payday loans have a short trepament term. Other than that some providers do  not fix repayment plans and due dates giving an opportunity to the borrowers to repay conveniently.

 

There are various types of short term financing and you can take it out for a personal or business purpose. This way you can overcome your short term financial problems quickly.

5. Help To Build Credit Score

This type of financing is beneficial for both the lending institutions and borrowers because the risk is lower than the long term financing and the underwriting process is fast. Due to short term nature of loans borrowers can easily maintain repayments and it will not change much over a short time.

 

Short term funding can be a lifesaver for individuals having bad credit scores and small businesses that are facing difficulties in securing standard business loans.

 

Overall if you take out a loan for a short time and make repayments on time, your lenders will send a positive report to the credit bureau that eventually increases your credit score. This way you will be able to take bigger loans in future. 

  

Now you know the most significant short term loans benefits. Now let’s have a look at some common questions that come to the mind of borrowers when taking out such a loan.

Purpose Of Short Term Loan

A short term debt allows you to borrow a set amount of money for a small period for any personal or business need. You have to repay the loan amount along with the interest rate at regular intervals.

 

Payment terms usually range from 3 months to 18 months. It can be secured or unsecured and both have their own pros and cons. You can get a low interest rate with a secured debt. On the other hand, to take out an unsecured funding you do not need to use any collateral. 

 

If you are stuck in any hard situation and need quick access to funds you can consider short term funding sources. Several lenders are present in the market offering various types of debt for personal and business use. You should always do research and shop around to find a lender and loan that meets all your requirements.

Types Of Short Term Financing

It is not one size fits all and as such different types of debts are present and you can choose one that meets your specific needs.

Types of short term loans

1. Payday Loan

It is a loan that you can get with a precondition that you have to repay it when you get your pay next month. However, some lenders offer flexibility and you can repay it over several months but keep in mind you have to pay a high interest rate.

2. Logbook loan

It is a type of short term debt that you get against your car. It means that when you take out such a loan you have to give up the ownership of your car. However, you can continue using your car as long as you are making repayments. Once you repay all the loan amount you can get possession of your car again. You can get an amount upto 70% of the value of your car.

3. Installment Loans

This type of fundings are for those who have bad credit scores and looking for online loans to request small amounts. This type of debt is repaid in weekly and monthly instalments up to a year. Lenders can take payments straight from borrowers’ accounts.

4. Doorstep Loans

It is a loan specially designed for borrowers who do not have a bank account. You will get cash delivered to you at your doorstep. Before getting it you have to complete an in house affordability assessment.

5. Credit Union Loans

In order to get this type of financing you must be a member of a credit union. The terms and conditions can vary depending on the credit union you are a part of. It has limited borrowing rates and payments are taken from your bank account until you repay all the loan amount.

Always choose a debt that you meet your needs and which you can afford to repay.

What Is The Eligibility Criteria?

If you want to fulfil your financial requirements through short term funding you must meet the eligibility criteria. It may differ from lender to lender but here are some common requirements you must have to take out a debt

You must be of 18 years of age or older.
You should be a UK resident.
You need to have proof of income.
Details of your bank account.
Proof of your address for at least past three years.
You should have a good credit score.
You have to pass a credit assessment and affordability check .
You need to provide a valid email address and mobile number.

If you meet the above short term eligibility criteria most lenders are likely to grant funds. Most of the short term loans have similar criteria.

Interest Rate On Short Term Loans

Although short term financing is ideal for covering immediate expenses, the interest rate is high compared to personal loans and long term fundings. Following are two different types of short term loan interest rate:

1. Variable APRs

Your lender sets an interest rate after seeing your credit score, affordability and the risks you have. This interest rate can change with the market fluctuations. There is a payment schedule but the amount you have to pay can vary with time.

2. Fixed APRs

The short term loan interest rate can change from lender to lender. In the fixed APR the interest rate does not fluctuate with market changes and you get an exact repayment schedule. This way you can predict how much you have to repay and decide whether you can afford to take out such a loan or not. Most borrowers prefer to get debts with fixed APRs because it helps to plan repayment.

The interest rate is high as compared to bank loans and other personal loans that is why it is essential to repay it on time.

How Can You Apply For Short Term Loan Online?

Online application process

If you decide to take out a short term loan the first thing you have to do is find the right lender. There are dozens of lenders in the UK so it can be challenging to find the best one. Therefore, we suggest you do research, shop around and make price comparisons to find a lender following the best lending practices and offering competitive prices.

 

Once you choose a lender, go to the website of that lender, fill an Short term loan online application form and provide necessary information and documents. The lender will assess your application and provide you an initial quote defining the loan terms and interest rate.

 

If you like and accept the quote the lender proceeds further and you will get the loan amount transferred in your bank account within the shortest possible time.

How To Find The Best Short Loan?

When choosing a short term loan you must consider the following two elements:

1. Interest Rate

It is essential to look at the interest rate to know your affordability. The interest may seem high but as you are borrowing for a small time so you do not have to pay much on top.

2. Repayment

It describes how long you are borrowing. As you are borrowing at a high interest so we recommend you to borrow for as little time as possible.

 

The interest rate and the amount you have to repay is represented as Annual Purchase Rate (APR). Since the interest rate is high, always make sure to repay on time otherwise you have to pay more.

Is It Right To Get Short Term Loan?

Usually, people take out short term loans to fulfil unexpected financial needs. It depends on your personal circumstances whether you should take out this type of debt or not. You should take into account the interest rate you have to pay and borrow only if you can afford to repay on time.

 

It is because if you can not repay on time the lenders charge late repayment fees and more interest is incurred. On the other hand it is an ideal option for those who can afford to repay it on time. You can get quick access to funds and fix unexpected problems.

Wrapping Up

Short term financing is perfect for those looking to borrow a small amount of money over a short period. It helps you to overcome unexpected financial needs and repay the loan amount in weekly or monthly  instalments. If you can afford to repay you can enjoy short term loan benefits otherwise it is not a suitable option for you.

 

Another significant benefit is that you can take out such a loan even if you have a bad credit score. When taking out such a loan always keep in mind the interest rate and your affordability. In addition, shop around to choose a well reputed lender and best loan deal.