Everything You Have To Know About Short-Term Loans

Short-Term Loans

Many people want to learn how to get short-term loans. They can be applied and approved very quickly.

You are going to get the funds in a few hours or days. They usually require little or no collateral. Therefore, these short-term loans can be desirable. However, in exchange for convenience, you will pay high fees and interest rates.

The repayment period will also only be a few weeks or months. You can take these loans from banks, financial institutions, private lenders, etc.

Before taking any short-term loans, you may want to look at this article to learn about these loans.

What Are Short-Term Loans?

Short-Term Loans definition

When we are talking about short-term loans, they are loans that have to be repaid in less than a year. In most cases, you have to repay the loans in a few weeks or months.

Most loan providers will require you to submit proof of employment with a certain amount of monthly salary, bank account, and also driver’s license. There is no or little collateral required to get any of these short-term loans.

There are some fees that are related to these loans, including interest rates, registration fees, and also penalties for late payment. You can check the additional information here – digido.ph/articles/short-term-loans

Sean Martin D. Plantado, head of the customer service at Digido.ph, notes that the availability of credit in the Philippines leads to people borrowing money not only for critical situations but also for unnecessary things. This hurts financial discipline and the formation of a high credit rating.

How Do These Short-Term Loans Work?

Short-Term Loans Work

It is very easy for you to apply for any of these short-term loans. They can be applied quickly. You only need to submit your application via their online systems.

Don’t forget to submit some of your documents, such as your credit information and also proof of employment. The loan providers are going to review your documents and application.

Then, they will offer you their loan terms, including the total fees you are going to pay, the interest rates, the total loan, and also the repayment period. Once you agree, you can sign the contract and get the money in less than 24 hours.

Types Of Short-Term Loans

There are several types of loans that can be classified as short-term loans. They may have their own characteristics, fee structures, terms, etc.

Here are some of the most popular short-term loans that are available on the market today.

a. Payday loans

Payday loans can provide cash for all borrowers immediately. The only requirement that you have to submit to the application system is proof of your job. These loans usually require immediate payback. Once your next paycheck clears, it will be deducted from your monthly payment.

b. Car title loans

Some people want to take a loan from their car titles. You can borrow money by using your vehicle as collateral. As long as you are the owner of the vehicle, you are eligible to apply for getting these car title loans. They can allow you to borrow up to 50 percent of the car’s market valuation. The repayment period can range from 15 to 30 days. Make sure that you prepare your budget carefully in order to avoid paying any late payment charges.

c. Bank overdrafts

When you take these loans, you will get temporary coverage from the banks, especially when your account doesn’t have a lot of funds. You will have regular and frequent payments for a certain period of time until you repay back the principal and the interest. These loans are usually classified as short-term loans because they have to be paid back immediately in a few months.

Benefits Of Short-Term Loans

1. Quick approval process

This is the most important benefit that you will get from short-term loans. Once they review your application, you will get your loan application approved in a few hours or days.

2. Instant funding

Many short-term lenders are ready to deposit cash into your account in less than 24 hours. If you need instant cash for any of your emergency needs, you may want to consider using these short-term loans.

3. No collateral is required

You don’t need to provide collateral for taking these loans, such as your car or your home.

4. Lower credit score requirements

If you have a low credit score, you may want to consider taking these short-term loans. The credit requirements for taking these loans are usually less stringent than the other types of loans. Therefore, you will have a better chance of getting your application approved.

Disadvantages Of Taking Short-Term Loans

Short-Term Loans disadvantage

1. Interest rates

Some lenders are going to charge you with high-interest rates up to 400% per year because they don’t require you to submit collateral for taking their loans. You will also need to pay the late payment charges when you cannot pay the loan on time.

2. Credit score penalties

These short-term loans will also affect the overall credit score you have. If you cannot pay the loans on time, you are going to get penalties on your credit score.

Alternatives to Short-Term Loans

Short-Term Loans alternatives

There are some other alternatives that you can take when you need instant cash for your needs. Some of these alternatives include:

1. Asking your friends and relatives

You can borrow money from your friends, families, and other relatives. However, you need to ensure that you can repay the loan back to maintain your good relationship with them.

2. Borrowing money from the equity of your home

If you need more money for your emergency needs, you can consider using your home equity as your loan collateral. You can consider taking a home equity loan.

3. Use credit cards

There are a lot of credit cards that can provide better options than short-term loans. You can use them to reduce the total interest fees that you are going to pay for taking any loans for your needs.

4. Personal loans

You can also consider taking any personal loans as alternatives to short-term loans. The terms and rates may differ from one option to another option. Personal loans usually have a fixed repayment period of 1 to 5  years.

There are some popular loan providers that can provide you with personal loans, for example, Upstart, SoFi, and also Lightstream.

5. Salary advances

Some companies can offer salary advances to their workers. The advances will be deducted from your future income. You can ask your company about this option when you need cash for any of your needs.

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