Who wants to languish under a loan burden for years? Ask anyone who wants to take a loan facility, and they’ll tell you it’s not their wish to suffer those monthly repayments forever.
Greater duration loans are a stress to your limited finances. Worse still, you may end up paying more interest than you’d anticipated.
If you want a loan that will allow you to pay back in a shorter duration and less interest, then short-term loans come in handy.
What are short-term loans?
This is a loan that you obtain to fund a business or a personal need. Unlike other traditional loans from banks and other institutions, you can get instant cash when your business falls short of cash or when you’re faced with an emergency.
Again, you may not be eligible for a line of credit from a bank; a short-term loan can be a great alternative. These loans have short-term repayment terms. Instead of paying for those many years, you can pay off with six to eighteen months.
There are several types of short-term loans;
ü Payday loans
If you’re looking for emergency cash, payday loans are the perfect option for you.
Payday loans are unsecured cash advances, usually small amounts with pretty high interest rates, and paid within a short period. These loans are generally less than $1,000 taken to cover essentials like rent, utilities, medical bills, and other emergencies.
ü Merchant cash advances
If your company has large credit or debit card sales, merchant cash advances will be a great option to acquire a loan in the shortest time possible. The lender allows you to borrow a lump sum, which will be paid back as a percentage of daily card sales. Thus the lender can access your card and take payments until the loan is paid in full.
ü Invoice financing
Here, the loan makes use of your businesses’ accounts receivables. You borrow money from the bank or lending institution against cash due from customers depending on the weeks that the invoices remain outstanding.
Following are the advantages of short-term loans;
1. Quick approval
This is a loan you obtain for quick cash to meet unforeseen expenses. They are approved quite quickly compared to the long-term loans- sometimes in a matter of hours. That works out so perfectly, especially when you have a pressing issue that needs money.
Interestingly also, most of the short-term loans are approved instantly on your mobile phone or online.
2. An excellent opportunity for people with a bad credit score
Short-term lenders are not so keen on your credit history to approve your loan. You only need to prove that you’ve stable employment and a steady income, your bank account information, confirmation that you don’t have outstanding loans. If your credit history is bad, then a short loan is a line of credit you can pursue.
Short loans also help you build your credit history- as you pay back in time, your credit score improves.
Many short-term loan facilities offer incredible flexibility. This is helpful when cash is tight, but you anticipate that things will get better soon. You and the lender make a schedule for payments, and you agree on the interest rate upfront.
Before you apply for the short-term credit facility, it’s prudent to consider the options you have and draw a budget based on the amount you’re applying for. Most importantly, make sure you get a loan that will allow you to repay without breaking a sweat.