Even if you are a good money manager, significant unplanned expenses like a car repair or illness might leave you in a tight financial spot. A short-term personal loan can be the solution if you are unable to borrow money from relatives or friends but still need immediate cash to pay your bills. Anyone with a reliable source of income can apply for a short-term personal loan, which is an unsecured loan.
How Short-Term Personal Loans Work
Unlike traditional Personal Loans, which you usually repay over several years, short-term Personal Loans are designed to repay in one year or even a few weeks depending on the loan. The short-term Personal Loan you get will depend on your creditworthiness and the lender you choose
Applying for A Short-Term Loan
The lender checks the creditor and looks at your passbook or other documents to evaluate your financial history.
If the lender approves your loan request, you will get a loan offer including the interest rate and term.
Once you agree with the loan terms, the lender will transfer the money to your bank account within 24 hours of approving your loan request.
What Are the Types of Short-Term Personal Loans?
For quick and small cash incentives that you’ll pay off in a year or less, you may hear about a payday loan or short-term loan from a lender, credit union or online lender.
Short-term loans from online lenders and credit unions will vary in the loan amount, interest rates and repayment period. You can contact your lender or credit union to see if it offers a short-term Personal Loan, or research online lenders to see if you can offer the terms you want.
A payday loan can provide you with the quick cash you need to get to your next paycheck, but it is a very expensive option due to its exorbitant interest rates and fees.
What Are the Interest Rates on Short-Term Personal Loans?
- While a short-term Personal Loan may initially seem like a real lifesaver, it can be an expensive way to borrow money. Compared to traditional loans, many short-term Personal Loans come with very high-interest rates.
- The interest rates will depend on the lender, the type of short-term loan you take out and your financial history.
- The type of loan varies from lender to lender, so it is important to do your research, compare offers and find the best interest rate that you can qualify for, rather than accepting the first loan offer you receive.
Benefits of Short-Term Loans
While they may not be the best choice for borrowing money in general, a short-term Personal Loan can be helpful in a pinch. Benefits include
Quick Cash
It gives you very quick access to the money when you need cash. If you have an unforeseen expense that needs to be repaid immediately, this loan can help.
No Collateral Required
In most cases, you don’t need to keep your home, car, or other property as collateral to get a short-term Personal Loan. You can get the money you want without risking valuable possession.
No Long-Term Commitment
In the case of a short-term Personal Loan, you don’t have to commit for years; you can get the cash you need, pay it off quickly, and move on.
Flexibility
Some lenders who offer short-term Personal Loans are flexible and willing to work with you to design a payment plan tailored to your specific needs and preferences.
Also Read :- How to Get a Low-Interest Rate on your Personal Loan
How Short-Term Personal Loans Can Affect Your Credit
- If you take out a short-term Personal Loan, it is likely to have at least some effect on your credit. If the lender runs a rigorous check on your credit to decide whether to approve you for a loan, your credit score will probably go down a few points.
- And if you make even one late payment on your loan, your credit score may be affected even more. In addition, because a short-term Personal Loan will increase your debt burden, it can hurt your credit.
- If one of your goals is to create credit, a payday loan will not help because the loan is not reported to the credit bureau. However, other short-term loans are usually reported to the credit bureaus and can help improve your credit if you are on top of your payments.
How To Get a Short-Term Personal Loan?
Getting a short-term Personal Loan is a straightforward process that involves the following steps.
Check Your Credit Score
Checking your credit score will help you determine if the lender will consider you a risky borrower. Of course, the higher your credit score, the better interest rates, and conditions you are likely to get. If you have a low credit score, focus on improving it.
Shop Around
Not all lenders offer short-term Personal Loans. Take the time to shop around and find a reputable lender with positive online reviews and clear terms and conditions that can offer you an interest rate and a term you can afford. Check the lender’s eligibility criteria online on their website to make sure you qualify.
Collect the Required Documents
Once you have found the lender, you will need to collect various personal and financial documents such as your driving license, tax forms and lender statements.
Complete the Application
The application process for a short-term Personal Loan varies from lender to lender. However, it is often shorter, it can be completed online, and it requires you to submit the documents you have collected.
Wait for Approval
Fortunately, you do not have to wait long to find out if you have been approved for this type of loan. Many lenders approve borrowers on the same day they apply. Once you are approved and agree to a loan, you will receive your funds almost instantly.
Conclusion
A short-term Personal Loan is a viable option when there is an urgent requirement for funds. As the money gets transferred within 24 hours, it is ideal for applicants who seek quick cash to fulfil their specific needs. Unlike other loans, a short-term loan lets you have the liberty to pay it back as soon as you want and bring down the debt burden. Other features like fast processing, no collateral requirements, and flexibility make it even more convenient for people to go for it. If you meet the basic eligibility criteria, It becomes extremely easy to avail of a short-term Personal Loan.
