If you’re looking on getting a personal loan for your expenses, you’ve probably heard of quick short-term loan, and you might be tempted to get them as soon as possible because the “quick” on quick short-term loans, but getting something without knowing what it is first is of course not a wise decision to make.
So, we make this guide that will help you avoid getting scammed from loan frauds when you’re finally getting your quick short-term loans, as well as explaining everything about said loan in detail to make sure that you know what you’re getting yourself into.
What is a quick short-term loan
A quick short-term loan is a type of loan that is obtained to support a temporary personal or business capital needs. Since it’s also a type of credit, short-term loan involves a borrowed cash amount and interest that needs to be paid the date that was given, which usually is a year from getting the loan.
A quick short-term loan is definitely a valuable option for small businesses or start-ups that aren’t eligible for a credit-line from a bank yet. It usually involves lower borrowed amounts starting from $100 to $100,000. And not only is it suitable for business and start-ups, it can also be used for individuals who find themselves with a temporary sudden financial problem.
The characteristics of a quick short-term loan
Quick short-term loan is called that because of how quickly the loan need to be paid off. Most of the time, the loan must be paid off in six months, or a year, or at the very most, 18 months. Any loan longer than those terms will be considered as medium or long-term loans.
Long term loans can last for just a year to somewhere around 25 years, just to put it into perspective. It’s also worth mentioning that some quick short-term loans don’t specify a payment schedule or due date, and instead allow their borrowers to pay back the loan at their own pace.
Types of quick short-term loans
Quick short-term loans can come in various types, such as:
- Merchant cash advances
This type of quick short-term loan is actually just cash advances but one that still operates like a loan from banks or lenders.
The borrower will make the loan payments by allowing the lender to access their credit facility. Each time a purchase is made, a certain percentage of the sale will be taken by the lender until their loan is repaid.
- Payday loans
While payday loan is not the best kind of short-term loan to take by any sane person, it’s still an option for when you really, really need it. The reason it’s called a payday loan is because borrowers need to pay the entire loan amount, plus interest in one lump sum on their next payday.
It’s one of the least recommendable type of loan just because of the absurd interest rate inherent to it.
- Lines of credit
A line of credit functions similarly to something like business credit card. A credit limit will be set and the business can then tap on the line of credit as needed. It will then make monthly installment payments against whatever was spent or borrowed.
Therefore, the monthly payments will vary in accordance to how much that line of credit was used. One advantage that line of credit has compared to business credit cards is that the former typically charge a lower APR.
- Invoice financing
This type of quick short-term loan is done by using a business receivables or invoices that are not paid by customers. The lender will loan the money and charges interest based on the number of weeks that invoices remain unpaid.
When it gets paid, the lender will interrupt the payment of the invoice and take the interest charged on the loan before returning what’s due to the business.
- Online or installment loans
Everything is easier when it’s done online in this day and age, and that includes loan as well. Within minutes of finishing the loan application and then getting approved, the money you borrowed will be wired to the borrower’s bank account very quickly.
What you need to know before borrowing short-term loans
If you want to get a short-term loan no matter what for your business or for yourself, pay attention to these things below to help you avoid getting scammed by loan frauds.
- Borrow as little as possible
Many short-term loans lenders give you the option to pay your loan back in three months rather than one.
Which while it may help in some situations when you require budgeting, remember that longer terms result in higher interest rate. So, if you’re able to, borrow as little as possible so that you could pay it off early without any penalties and even higher interest than before.
- If you can’t repay it on-time, don’t bother with it
The crucial thing in getting short-term loan is whether or not you can repay it on time.
Because if you can’t it will leave you in worse shape than ever before since the interest will keep getting higher and higher, and if you take the extended loan that these loans offer, you’ll need to pay more and more with each roll over until you’re trapped in a cycle of debt.
- Don’t take it to repay another loan
Short-term loans are already expensive enough as it is. As such, the only proper way to use it if you need it is for emergency such as health related emergency.
It should never be used to fill the gap between your incomings and outgoings every month. Because if that’s happening, then there lies a fundamental problem that will only get worse when you get a short-term loan for it.
Overall, quick short-term loan, while they are indeed feasible and sometimes even good for small businesses just starting or other personal emergency such as health, it always comes with a price of high APR that you have to deal with considering how fast you’ll get that money.
So, always be careful, only do it if you’re desperate and have no other choice, and don’t get to spend it on meaningless frivolities that you can live without.
That’s all from us for now, thank you for reading this article and we hope to see you on the next one sooner rather than later.