A short term loan is a perfect option when you start a new business and need cash without putting yourself into a long term debt commitment. It is challenging to get a personal loan if you need cash flow for a short amount of time. Because banks and traditional financial societies want to commit their customers to long term loans. Many people search for loans that can fulfil their short-term financial needs until their next paycheck. Moreover, startups and small businesses are not eligible to get a credit line from banks. A short term loan can help you in such situations.
Before getting this type of loan you should understand what a short term loan is, its types and how you can get it.
What is a Short term Loan?
A short term loan is a type of loan that is obtained to fulfil a temporary business or personal financial needs. Typically, the repayment plan of such loans ranges from a few weeks to a year. Although it is easier to get short term loans, they have high-interest rates rather than traditional loans. Some other things that you should keep in mind before taking such loans include late payment fees, refinancing options, origination fees and other applicable charges. These loans are usually unsecured, so the necessity to have collateral also decreases.
Types Of Short term Loans
There are different types of short term loans. By knowing each type, it will become easier for you to get one that is suitable for you.
Payday Loan: In a payday loan, a person can borrow a small amount of money till his paycheck arrives. You can get a payday loan easily. However, these loans have high interest rates, so you should explore different platforms to get a better option.
Revolving Credit: In this type of loan, the credit is automatically renewed as soon as the debt is paid off. Revolving credit is a flexible financial tool as the borrower can withdraw, repay and withdraw again whenever needed.
Logbook Loan: It is a secured loan that uses your vehicle as collateral. The lender will lend an amount according to the worth of your vehicle. In a logbook loan, if you are not able to repay the amount, the lender will repossess your car permanently.
No Credit Check Loan: It is a type of short term loan in which a lender will not carry out a comprehensive review of your credit history. These loans are granted on the basis of your salary.
Where To Find Short term Loan?
Before you rush and get yourself a loan, you should think about how much money you want to borrow and the amount of time for which you need to borrow the money. One thing that we suggest is that you should treat loans similar to other products that you are shopping for. It means that you should shop around to select the best loan type and conduct a price comparison to get low-interest rates.
Here we are providing you with some sources from where you can get short term loans.
There are many direct lenders providing online loans in the UK. It is easy to get short term loans from such lenders as you can apply for loans online at any time. You can check the transparency of the lenders by going to their sites and reading the customer reviews. Furthermore, most lenders provide terms and conditions on their websites, and you can read and understand them before taking a loan. To apply online for a loan, you have to register yourself, fill an application form and submit the necessary documents. If your loan application is approved, the lender will send your money through direct deposit.
Pawn Shops also offer simple loans for a small amount of time if you have a valuable item to use as collateral. It means that these loans are secured against a valuable asset. If you repay the loan amount under the contract terms, the lender will return your item. But if you fail to repay the amount, the pawnbroker will sell this item to regain his loss from the loan. There are many advantages of getting a loan from a Pawnshop, such as easy access to a loan and no credit risk. Still, you should select a reputable pawn shop to make sure that the asset you use as collateral is safe. Also, the pawnshops come with astronomical interest rates that you should avoid if possible.
Payday lenders provide you with small loans that you must return by your next payday. These loans can help you fulfil your immediate cash needs. However, these lenders offer high-cost loans and usually charge a triple-digit annual percentage rate. Payday loans work differently than other consumer loans. You can get it online or from any branch of payday lenders. Terms and conditions vary from lender to lender. Some lenders set a limit on how much you can borrow. Payday lenders ask some necessary questions such as your identity, income source, and credit score. Once your loan is approved you will receive cash or a check. Because of high-interest rates, we suggest that you should consider payday loans as your last resort.
Credit unions are nonprofit organisations that are run by and for their members. The members of the credit union pool their savings to lend to each other and operate the unit. These unions provide loans at lower interest rates than the banks. By law credit unions can not charge an interest rate of more than 3%. The money that a union has in its savings account is used to give loans to other members who are in need of it. All the credit unions in the UK are regulated by the Financial Conduct Authority. To get a loan from the credit union you have to be a member of it and some unions require you to build up some savings before getting a loan.
Short-term loans are becoming more and more popular in the UK because of easy access to funds and flexible repayment options. You should choose a type of loan and a lender wisely that can fulfil your financial needs and offer a competitive interest rate.