Short Term LoansFinancial Dictionary -> Loans -> Short Term Loans
Short-term loans come in a variety of types and have a short period of maturity. Colleges can offer short-term loans to students as a way to help finance their studies. These loans have to be repaid in about 60 days or so depending on the terms set by the respective institution. The maturity date will depend on many factors such as the amount of money borrowed and the financial situation of the student.
Payday loans are short-term instruments available at payday loan kiosks or over the Internet. These loans are unsecured and have a substantial interest rate. Small amounts of money are typically loaned, e.g. between $30 and $100. However, some companies offer loans in the amount of $1000 and more. Individuals typically apply for payday loans in case they fall short of cash before the payday arrives. Usually, this type of loan has a maturity of just one month. As long as the sum is paid earlier or on time, the borrower does not have to worry about paying high interest.
Car title loans are a short-term loan instrument, also known as auto title loans or simply title loans. Borrowers can obtain a loan in the amount of $100-$10,000, depending on the brand and model of the car. Because this loan is secured by the car title, interest rates can be significantly lower than that of payday loans. However, the interest rate is still quite high compared to other long-term loans. As the loan is secured, the lending institution will not require a credit check. Applications are approved within a short time frame, making them alluring to people desperate for cash. When payments are not made in a timely manner, the loan incurs high interest.
Banks and credit unions also offer short-term loans to their consumers. The maturity can be anywhere between 60 and 120 days after the loan has been approved, but the term may be as long as three years. The latter depends on the borrowed amount and on the specific regulations of the lending bank. Loans can be secured or unsecured. If the loan is of the second type, the application process may take longer, with the bank checking the borrower's credit history. When the client has a good record, obtaining a short-term loan is not difficult. However, individuals with poor credit history may need to provide collateral in order to get approval. Another option available for them is applying for a secured credit card.
When shopping for short-term loans, it is important to look at factors such as interest rates, maturity, credit limit, late charges, and other fees that may apply. Before entering into a loan contract, make sure you have sufficient income to meet your financial obligations. Unless you need money for cases of emergency (hospitalization and medical bills), it is better to look for other options of financing. In the long run, finding a better paid job or getting that promotion make more sense that living on credit.