Short Term Loans

Short Term Loan Explained

A short term loan is a type of loan that you need to repay within a short time. It helps borrowers meet their short term financial needs such as home renovation, car repair or paying unexpected utility bills. These loans are available for both individuals and businesses. Companies can use short term loan UK to arrange money for working capital needs.

short term loans

The time period of the loan may vary depending on the type of loan. Typically the loan tenure is between 6 months to a year, but some loans have a tenure of two years. The interest rate of such loans is higher than the traditional bank loans.

short term loans
How Does A Short Term Loan Work

How Does A Short term Loan Work?

A short term loan works to help people when they need emergency financial help. Many financial institutions and credit unions offer short-term debts to businesses and individuals to cover their everyday costs.

How Does A Short Term Loan Work

These loans are of different types, and borrowers can take these loans from banks, financial institutions or brokers. Borrowers can apply online or visit a loan provider. The lender will check the applicant’s affordability, creditworthiness and discuss loan terms before the approval of the loan application.

How Does A Short Term Loan Work

Features Of Short Term Loans:

Short term loans are different from traditional bank loans, having significant features including:

Types Of Short Term Loans

Short term loans come in different types, some of which are as follows:

A line of credit is a type of loan in which a financial institution or bank sets a maximum amount that an individual can borrow. The borrowers can take out this loan amount in instalments or in a lump sum. However, borrowers are not allowed to withdraw more than the permitted amount depending on their creditworthiness. In addition, with the loan amount, the borrower needs to pay a set interest rate.

 

After paying all the dues, a borrower is again able to use the line of credit service. Line of credit is the best option for individuals who need a regular short term credit supply.

It is one of the most common types of credit facility. If borrowers have insufficient money in their account than the amount they are trying to withdraw, the bank will provide the rest with this borrowing facility.

 

In return, banks charge a high-interest rate from the borrowers. Some short term loan companies in the UK charge exceptionally high-interest rates. Such banks also have to pay millions in fines for these illegalities.

These loans are different from Line of credit because these loans end after a specific tenure. If borrowers need to borrow again, they have to make a new loan application—for example, a personal loan to go for a trip or for a wedding.

It is a type of short term borrowing that is a cash advance but acts like a loan. It is best suitable for businesses that deal with large debit/credit card sales instead of cash sales. With the help of this facility, lenders borrow a specific amount according to the needs of the borrower and get access to the borrower’s credit facility. Every time a customer of the borrower makes a purchase, a certain percentage of it is taken by the lender until all the loan amount is repaid.

It is a short term loan that is easy to obtain compared to other types. The loan amount depends on the borrower's monthly income. Payday loans offer high interest rates, and you can take them from high street lenders. The borrower has to repay the loan amount plus interest rate when you receive your next paycheck.

Using this type of facility, a company takes out a loan from a financial institution or bank against the money that is yet unpaid by the customers, i.e. accounts receivables. When your customers take time to pay bills, during this time, you can borrow money to meet liquidity.

 

The amount of loan and the interest rate is based on the number of weeks that your customers take to pay bills. Whenever an invoice is paid, the lender interrupts and takes the loan amount plus the interest from this payment.

Short Term Loan Advantages

Here are some Short term loan benefits for the borrowers:

Quick approval

Short term loans do not include lengthy approval processes, and borrowers can get quick access to funds to fulfil their emergency financial needs.

Low-interest rates

When you take a loan for a short period, you will ultimately pay less interest on it because the longer you owe the lent money, the more the interest rate.

Unsecured

Most short term loans are unsecured, and borrowers do not need to use any of their assets as collateral. It makes it easier for borrowers to get funds in a short time.

Avenue for small loans

Borrowers do not always need a long term loan or mortgage. Individuals who need small amounts of money for a short amount of time find short term loans ideal to meet their short term obligations.

Improves credit score

If you have a poor credit history, you can take a short term loan for bad credit, and when you repay the lent amount, you will see your credit rating improve.

Flexible repayment options

These types of loans are flexible and convenient. You can repay the lent amount whether in instalments over a while or as a lump sum.
Now you know that there are a number of short term loan benefits that make it popular among the borrowers.

How To Find A Short Term Loan?

Be careful when searching for short term loans online. You may find most of the results as payday loans. Payday loans come with high-interest rates and fees and are expensive ways of borrowing. Such loans also show up in your credit history and make it difficult for you to get other loans.

How To Find A Short Term Loan

We are providing you with the short term loan best rates comparison service and also help you find the right loan provider. You can get a quick comparison of loans by providing us with some necessary information such as how much money you need and for how long.

How To Find A Short Term Loan

Who Can Get A Short Term Loan

Whether you want to take out a standard short term loan or looking for another type of short term borrowings, they have similar requirements:

“If you pass through the credit and affordability check, you will get quick access to funds”.