Short-term loans come in handy at times of emergency. They are a quick and easy way to get cash when in need. But to qualify for short-term loans, you must fulfill certain criteria.
This article will talk about everything you need to know about short-term loans, their characteristics, and their types.
What are Short Term Loans?
Short-term loans are small loan amounts that are usually given for short durations. They are not just limited to getting money during emergencies but can be availed on a day you need some cash urgently. You can apply for short term loan Montreal facility at any time and get approved within a short time.
Short Term Loan Characteristics
Specific characteristics define short-term loans. These include:
- Loan amount: Usually, the loan amount is small and can be borrowed for a short duration, such as two weeks or one month.
- Interest rates: Interest rates on these loans are usually high compared to other loan types. Borrowers should be aware that they will need to pay back the principal amount and interest rates that are accrued daily.
- Duration of the loan: Short-term loans are usually given for small durations; hence, there is no point in paying interest on them for long periods.
- Loan repayment term: The payback period for short-term loans is also very less like two weeks or one month. You may even get a longer duration if you negotiate an extension with your lender.
Types of Short Term Loans
There are many short-term loans that you can apply for. They include;
- Payday loans: These are the shortest of all loans. They are given for small durations like 14 or 31 days.
- Instalment loans: These are available in different durations, but most often, they are given for a one-year period with monthly instalments.
- Secured loans: If you have some kind of guarantee, which is collateral, then you can apply for these loans and get approved easily. Collateral can be in the form of a car title, house title, or certificate.
- Unsecured loans: If none of the above is applicable, you can get an unsecured loan. These are given for a longer duration but have higher interest rates than other types of loans. You don’t need collateral to apply for such loans.
- Merchant cash advances: These are also unsecured loans but are often given out to small business owners. If you have a business that you need to expand, you can apply for merchant cash advances.
- Social lending: If you have a poor credit history, social lending is particularly made for you. You can apply with your friends or family members and get the amount approved easily.
- Lines of credit: Short-term loans are also available in the form of lines of credit. These loans are also unsecured, and you can easily get them by having a good FICO score. They are usually given using a business credit card.
- Invoice financing: If you have a good business and your company is willing to give you credit for your outstanding invoices, then invoice financing can be beneficial. These loans are unsecured and available to all types of businesses without any prior requirement of FICO score or collateral.