Need A Little Funding Immediately Say Hello To Short-Term Loans

 

Introduction

There are several occasions when we urgently need a little extra capital than we have in our savings. The purpose is usually an emergency like paying the workers or buying inventory or for repair and maintenance of the asset or property. The capital is needed for a short period because the borrower knows that more cash is on its way that will take care of future expenses. It could be pending payments from clients or a fixed deposit getting matured in the next quarter. However, lenders encourage applicants to go for the long-term loan because of the interest amount attached to it over a stretched tenure. They offer a bigger amount and a lower interest rate. But if you genuinely need smaller capital for a brief duration, a short-term loan is what you ideally need.

What is a Short Term Loan?

As the name suggests, short-term loans are meant for a short period. It is quickly disbursed and has to be repaid to the lender at the earliest possible but within a year. Also known as Payday loans, these are usually one-time loans. They take care of your temporary working capital needs. One can apply for the loan as an individual or as a business. Generally, for individuals, it helps in dealing with emergencies and in business, it supports those trades that are seasonal in nature.

Features of a Short Term Loan

• Small loan amounts:

It is important to understand why you need the amount. Short-term loans are meant to take care of emergencies. If you need a new music system that is not an emergency but repairing your leaking rooftop is. In these loans, the lenders offer a small amount to deal with situations that cannot wait. The size of the amount that will get sanctioned depends on your need, income, collateral etc. Always borrow what you can afford.

• Faster repayments:

Once the loan is approved, the disbursal is made quite quickly. The borrower will have to repay the interest amount along with the principal amount. The repayment could be done in weekly, monthly or yearly repayments. It is mostly done in one go as the time period is a shorter one usually between 60-120 days. 

• Higher rate of interest:

Here comes the catch. Every lender wants maximum returns from the loan and since in short-term loans, the amount and tenure is small, they levy heavy interest rates, almost double of long-term loans. So, request for a better rate.

• Easy qualification:

The biggest reason for the popularity of short-term loans is that they can be sanctioned even if you don’t have a very good credit history. Lenders usually see your latest income proofs and sanction the loan. The verification and documentation are done with lightning speed and the loan is usually disbursed within a day. The credit history, however, plays a big part in deciding the interest rates.

Why apply for a short term loan?

• Finance short term requirements:  

Sometimes, we don’t have enough cash to meet some capital needs, for example, you need to pay the admission fee of your kids in a new school and it’s much more than you had calculated. You can always take a short-term loan to pay the money and repay the loan when the salary comes. Similarly, you can pay rent or book urgent flight tickets with the loan money. These types of requirements can be easily sorted by short-term loans without anyone knowing that you were dealing with a cash crunch.  

• Emergency cash requirements:  

Specifically meant for emergencies, such loans take care of capital needs in case of emergencies like medical expenses, repair of equipment, etc.

• Buy inventory:

It is necessary to have minimum inventory levels termed as the safety stock to ensure continuity of supply in the event of an increase in the demand. This happens in the retail business when holidays are around the corner. Before you made profits from the sale, you need the capital for the stock.

• Raise working capital:

Companies often come across situations where they don’t have sufficient funds in hand for daily operations like paying salaries, cab services, water and electricity bills, and other demands. These problems can be fixed with a short-term loan.

Short-term loans can be both secured and unsecured loans depending on what suits both the lender and borrower best. However, if you are willing to pay a little more on interest, short-term loans can tackle your minor cash flow problems. A smaller amount, high approval rate, quicker disbursal, and easy repayments make it the best option to get capital immediately.