Consumers today have a bunch of options when they want to borrow money. One of these options is taking short-term loans. This loan type suits borrowers looking for loans they are willing to repay within a brief loan duration.
When you search for short-term loans on the internet, you can tell that many lenders offer such a type of financing. Many borrowers take short-term loans because of their easy qualifications and accessibility.
Do you plan to borrow a short-term loan? Well, here are things you need to be familiar with this loan option before making your application.
Types of Short-Term Loans
Lenders offer different kinds of short-term loans to people who need urgent cash. These five loans in our list are the most popular types of short-term loans.
Payday Loans
If you have been looking for short-term loans for some time, surely you have come across ads for payday loans. This type of short-term loan can be repaid within two weeks, and borrowers use it for purchases, including utility bills payments and buying medicines.
Payday loans have expensive interest rates. Anyone who’s planning to get a payday loan should consider its exorbitant rate. Read this Plungedindebt article for some tips when getting payday loans.
Bridge Loans
Bridge loans have a repayment duration of 6 months to 1 year. This financing helps you borrow some cash pending a longer-term loan. Borrowers use a bridge loan to cover the costs of a business operation or make a down payment for a property purchase.
Merchant Cash Advances
If you’re operating a business, you can put your credit facility as collateral against your loan. Merchant cash advances enable you to obtain a loan from a lender easily if you have a credit facility. Your repayment for the money you borrow is the portion of your sales, which is collected by the lender until your loan is fully paid.
Invoice Financing
Invoice financing is an excellent alternative for people looking for financing for their business. Your account receivables will serve as a security against the money you borrow. The larger your account receivable, the more chances you get financing from a lender. The lender gets paid every time a customer makes a payment for the invoices.
Line of Credit
It’s not uncommon for individuals and businesses to use lines of credit for financing. This type of financing has a repayment term not exceeding one year, depending on the lender. You can borrow whatever amount from the credit line, but you can’t borrow more than what is in the credit line.
Short-Term Loans’ Advantages
Let’s take a look at the advantages of short-term loans that attract borrowers into taking them.
Easy to Access
If you list down the most accessible loan options today, short-term loans will surely make it to the list. Many lenders that offer such loans operate online, making it easier for borrowers to apply for them. It means that people who want to apply for short-term loans can submit their applications online.
Aside from having a fast and straightforward application process, short-term loans also give a glimmer of hope to folks with bad credit. Most lenders allow borrowers with poor credit scores to get short-term loans if they’re receiving a monthly income regularly.
Builds or Repairs Your Credit
Some borrowers who apply for loans want to build or repair their credit scores. Since short-term loans don’t set a long-time attachment to borrowers, they’re a great option for credit-building.
Short-term loans have durations ranging from two weeks to one year. If you’re repaying your debt on time consistently, you’re on the road to building or repairing your credit score.
Less Risky from Most People’s Perspective
The short repayment duration causes some borrowers to look at short-term loans as less risky. In contrast to long-term loans with maturity dates ranging from 5 to 15 years, short-term loans have maturity dates of only a few weeks or months. You won’t be paying your loan for a long time if you choose short-term loans.
Takeaway
Short-term loans can provide advantages to borrowers who don’t want long-term debt. Lines of credit, payday loans, bridge loans, merchant cash advances, and invoice financing are types of short-term loans that you can access easily nowadays. You can look for lenders online that offer such loans if you want to borrow urgent cash.
