SHORT TERM LOANS APPLICATION PROCESS

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Short Term Loans

There are lenders who give short term loans with some months while others give the loans for up to one and half years.

Short term loans are basically loans that do not have a long life span.

These loans last between three months to one and half years. Each lender and how long they allow a short term loan last.

Most traditional, non-bank financial institutions as well as other financial institutions as well as lenders online give short term loans.

Like other types of loans, short term loans has all the requirements needed for all kinds of loans the only difference is that the tenure of the loan is short.

Short term loans explained further

The amount of money requested by the borrower is taken through processes to make sure the borrower is capable of paying back the loan before it is granted.

The loan is given to the borrower in a lump sum and the borrower is required to pay back the loan within the period that was agreed upon by both parties.

The lender calculates how much will be paid by the borrower weekly or as agreed using the dept to income ratio.

One thing about short term loans is that the period for payment is not long so the repayment amounts are quite high.

Interest rates on short term loans are also on the high side, however at the end of the loan tenure the amounts paid can still not be compared to a long or medium term loan.

The longer the loan the more you pay because of the interest on the loan and there is stress associated paying off long term loans.

You can get your short term loans as quickly as the same day you applied for it.

The good thing about lenders who give short term loans is that what matters most to them is your ability to pay back the loan.

What is considered most is how much you earn and if you have other loans, because if there are more loans to service is likely you wont be able to keep up with repayments.

Your credit history is really not a problem because lenders have found a way around it by way of giving short term loans at high interest rate.

At what time is it right to go for short term loans

Long term loans are usually huge amounts that are taken for long periods such as 20 years. Example is in the case of mortgage loans.

Businesses in most cases need money to sort out financial problems or buy office equipment but there isn’t enough money to take care of that.

Short term loans will surely be the best bet for such businesses to solve such problems as soon as possible to avoid halting business operations.

Another case is that sometimes the money available is for the daily running of the business so taking it to buy something will affect the running of the business.

So borrowing to acquire such office equipment is the best option available to the business.

In the case of individuals, short term loans come in handy when you need money to take care of emergencies such as taking of medical bills or repairing a broken down car.

When money is not readily available for such emergencies, it can be very frustrating but with short term loans all of such stress is in the past.

In as much as sometimes going for a short term loan is due to an emergency, it is wise to think about the fees for a moment before finally making the decision to go for it.

You should be able to pay back the loan you are going for and being a short loan the period for paying is not long but the repayments can be high because of the interest rate.

Check your finances well to be sure you can afford the loan instead of taking the loan and defaulting.

This will be a bad record for you and will affect your effort in going for a loan in future.

Examples of short term loans

As stated above short loans are loans are taken for a short period. The period can be between three months to a maximum of one and half years.

Therefore if you need money to take care of some urgent needs or emergencies during the month but don’t have money to take care of that, short term loans are appropriate.

The reason being that the amount will be enough to take care of situations such as car repairs, hospital bills, home improvement.

And you can pay back the amount in the shortest possible to time, however at a high interest rate.

So if you are looking for a loan to purchase a house or a car, a short term loan is not for you.

A long term loan will be more befitting for that purpose, since you will need a substantial amount to get the home or car and the these amounts come with long period of payment time.

Traditional lenders such as the banks and credit unions hardly give short term loans, and even if they do, its for the longest short term period (one or one and half years).

However, there are some lenders out there who give short term loans regardless of the borrowers credit history because they give the loans at very high interest rates.

We will discuss a few of these short term lenders below:

Pay day loans

When you are hit with a lot of financial problems or situations, a day, an hour or even a minute seems like forever.

Your wish is to have the needed money as soon as possible so you can solve your problem you find yourself in.

Fortunately pay day loans are here to help people who find themselves in such financial situations.
Pay day loans are very easy to get and the money is disbursed almost as quickly as the application is put in.

Applying for a pay day loan from their offices will also be fast but wont be as fast as applying online.
Baring in mind that whether you apply from an office or online the interest rate will not change, but from online will mean you will get your money faster.

Some people refer to short term loans as pay day loans and vice versa due to the short period of repayment.

The short tenure for pay day loans makes them very tricky. In the sense that you are supposed to pay back with interest which is very high plus other fees.

You will end up paying about twice the loan you borrowed and this can negatively affect your monthly budget.

In as much you might be in a tight corner for cash, it will be very advantageous to you to know all about the cost involved in taking a pay day loan.

How pay day loans work

The amounts involved with pay day loans are not huge because the period for the loan is also a couple of weeks or a month.

What the lender requires from you is that you write post dated cheques for the amount you have borrowed inclusive of interest and fees.

You give this cheque to the pay day lender for them to cash the cheque when the loan repayment is due.

Otherwise if the time is due for you to repay your pay day loan and you know you will not be able to pay at the agreed date, you can roll over the loan.

The only problem with this is that the roll attracts more fees or higher interest rate.
It will be better if you make all the effort to pay back the loan when the time is due to avoid all the extra charges.

Also the more you roll up or extend the repayment of pay day loans, the more your debt increases.

Lenders of pay day loans in some states are not allowed to roll over debts by borrowers.

While other states allow it but have put a cup on the number of times you can do that.

Make sure you are aware of the laws of the state concerning the extension of repayment for pay day loans so you don’t find yourself in a tight corner.

To get a pay day loan you don’t need a good credit history to be qualify for the loan.

Lenders of pay day loans do not check borrowers credit history because they do not care about that.

Because of this some people refer to pay day loans as no credit check loans.

Do banks offer pay day loans?

Traditionally banks do not offer pay day loans which are generally called short term loans.

However, the banks have come to realize that pay day loans have become a part of most people’s everyday lives.

And other financial institutions are cashing in on that market so the banks have also decided to branch into that to cash in too.

The normal loans in the traditional banks require the borrower to have a good credit history or have a collateral as security.

However pay day loans in the banks that have started giving them have similarities to the ones offered by other financial institutions.

Similarities such as very high interest rates, fast processing, no need for a good credit history to be able to qualify.

The traditional banks that offer these kinds of loans might not call them pay day loans, but another name with all the features of a pay day loan.

Know the cost and drawbacks of short term loans

To be precise, every pay day loan is expensive. Some more expensive than others if they are compared to the other types of loans.

You can pay over five hundred percentage rate in annual percentage rate calculated depending on the terms and conditions.

The major downside for short term loans are the interest rate associated with it.

So what happens is that in the interim, the money might solve your immediate problem but in the end bring you more debt than you can imagine.

Naturally because of the high interest rate on short term loans, your budget automatically goes up.

So it will be more beneficial if you can afford to avoid short term loans.

If that is not possible, it will be in your own interest to pay off the short term loan when its due.

A short term loan should not be a means of life but can be a once or twice a year relief when you are hard pressed for money.

Some alternatives to short term loans

Though short term loans help out when you are in a tight corner or hard up, it is important to know that if you start planning early you can avoid short term loans.

Avoiding short term loans will help you save some money because you will not pay interest or fees on any loan and that money can be put in good use.

Consider the below alternatives instead of short term loans:
• You may have your job which gives you an income, but the income is not enough to sustain you during the month.

Or sometimes it’s just enough for the month which means you cannot afford any luxury.

What you can do is to get a part time job which will give you extra income to help you out.

• Having a fund which is strictly for emergencies is also a way to stay away from short term or pay day loans.

• Another alternative is to start building your credit early enough so that when you need money you can borrow from the traditional lenders.

• If you save with a financial institution, when you need money you can get an unsecured loan from them.

• Lenders are open to negotiating of loans modification and payment plans that will be suitable to you.

But the catch is that you must have a good credit scores and good credit history to have that privilege.

• An alternative that also works for a lot of people is the peer to peer lending.

You can get a loan with no interest or even if there is it will be much lower from what short term loans offer or any other loans for that matter.

Family and friends can also be an alternative you can look at to borrow from just to avoid taking pay day loans.

What do you need to apply for short term loans?

Deciding to take a short term loan must mean you have exhausted all the other options and still have not been successful.

Before you fill the application form for short term loans you should have read all there needs to read about short term loans and about the lender you decide to get a loan from.

The process is very simple when it comes to applying for short term loans.

The requirements are also quite straightforward and easy to provide especially if you apply online.

First of all as a borrower of a short term loan you must be eighteen or above to qualify.

An ID is also very important when applying for a loan with any lender regardless of the type of loan.

Proof of your income is also an important requirement lenders ask of borrowers to provide.

When you apply online, the application is processed faster than when you do a walk in to the offices of the lenders.

If you meet all the requirements of the lender, you are able to get your money within the same hour.

The lender will then disburse your money to the account number you provided in the application form.

Before your loan is given you are made of how much you will be paying for the loan inclusive of interest and other fees.

Pros and Cons of short term loans

PROS :

• Faster to get

Getting loans traditionally takes weeks or even sometimes months.

This becomes inconvenient for borrowers because when you apply for a loan you are doing so because you need the money for an urgent purpose.

Fortunately processes for short term loans are faster and this makes borrowers prefer it to other loans.

The online process has cancelled out a lot of processes that delayed the process. So you can get your money typically within an hour or latest by a day.

• Qualifying for a short term loan is easy

Its easy to get a short term loan considering that the requirements are more flexible and easy to get by borrowers.

Having a bad credit history will not disqualify you for a short term loan so far as you are above eighteen, you have an ID and can show proof of income.

• You pay back the loan quickly

The duration for short term are very short hence the name short term loans.

The shortest period for a short term loan can be 2 weeks whiles the longest time a short term loan can be is one and half years.

The payment scheduled is discussed by the lender and borrower and the best option is settled on.

This payment schedule can be either daily or weekly whichever is most convenient for you.

However, there lenders who are open to early repayment and do not charge any penalty for that.

Other lenders are not so open to it so to discourage borrowers from opting for early repayments, lenders charge some fees.

CONS:
• Interest rates are high

If you have taken a long term loan before and now about to take a short term loan you will be shocked at the interest rate difference.

Long term loans have much lower interest rates as compared to short term loans which have very interest rates making the loans more expensive.

• Your income must be high

Lenders of short term loans do not take collateral as security for loans, and also do not use your bad credit to deny you the loan.

Your bad credit history is not of much interest to short term lenders. What is of utmost importance to them is for you to be able to pay back their loans.

To be able to convince them(short term lenders) you need to show a few months of your bank statement and also your pay slips.

• Possibility of falling into a borrowing cycle is high

When you go for a short term loan, your repayments can easily bloat your budget which can affect a lot of things in your life.

Especially when you are making daily repayments. You might not be able to keep up with it and it will affect your loan repayments.

If you miss a days payments, you will have to double your payments the next day to make up for the missed payments the day before.
This can easily disrupt your budget and put a lot of strain on your expenses making it more difficult to keep up.

The possibility of you going back to borrow again to be able to sustain your self through the month becomes the only option.

Falling into a cycle becomes easy and coming out is difficult.

• Short term loans are addictive

The way short term loans come in handy makes it one of the reliable loans available.

Borrowers who are hard up in terms of cash can easily fall on it for relief.

This is why you can easily become addicted to short term loans due to the convenience and quick processing time.

Summary

Short term loans can be convenient and help you out of difficult financial situations.

The trick is not to make it a habit, since the high interest rate can make you pay off huge amounts which can easily punch a hole in your finances.

Take short term loans when you know you have tried all options and have failed to get the money you need urgently.

If you make short term loans a habit you will end up in a tight corner with regards to your budget and finances.

Although short term loan can be a blessing, it can also be a curse if not managed well.