We might often hear the term short term loans, but not really be sure of what they are. It is a good idea though to familiarise ourselves with what they are as it is important to have a good understanding or all of the types of loans. This is because if we do find that we need to borrow some money, then we will need to look at all of our options and make sure that we find the loan which suits our needs the best. If we do not know how they work, then we will not be able to consider them.
With short term loans there are a few basic features that set them aside form other types of loans and these are the things that you should be noting.
- Credit check – most lenders do a credit check in order to find out how capable the applicant is of repaying the loan. They want to be sure that they will get the money that they are owed and therefore they will want to see whether they have a good income, have made regular repayments before and if they have had financial problems before. Then they will use that information to decide whether they want to lend them money or not. With a short term lender, they will not worry about this but they will lend money anyway. They will try to build up trust between themselves and the customer by lending them a small amount and then if it is repaid successfully, they will lend them a bit more.
- Repay quickly – The repayment will normally have to be made very quickly. The loans often have to be repaid on the borrowers next pay day. This means that they will just hold the loan for a few weeks or maybe a month and then they will then repay it. This can be a good thing, especially for those people that do not like to have outstanding debts. However, it does mean that you will have to find the money quickly and you will often have to repay in a lump sum which means that you will need to find a lot of money too.
- Arrange fast – these loans can normally be arranged very quickly. There are some short term lenders which will be able to arrange a loan for you within a few hours, which means that you really can use it for emergencies. You will also find that there are some which will be able to arrange loans outside of normal banking hours so you can get money at the weekend or overnight if you need it, so they really are for all emergencies.
- Small amounts lent – the amount of money that they provide is relatively small. This means that it can be very useful if you do not want to borrow very much. Often a lender will give you a lot more money than you actually need and this means that you will be able to treat yourself to a few things. However, it also means that you will have a lot more money to repay and you will need to pay the interest on it as well. This can not only be expensive but it also means that you will have more repayments to make and the loan could go on for much longer.
You can see that there are quite a few features of short term loans that are different to more mainstream loans. This means that you will need to think about whether you are better off with this sort of loan or not.