Types Of Short-Term Loans
While many of the most significant loans such as car loans, home mortgages, and student loans take years and even decades to pay off, there are plenty of loans that are much more abbreviated in their timelines. Short term loans can help a family get through a rough financial patch, bridge the gap between pay dates, and give individuals a little bit of spending money in tight times. Whatever the occasion, there’s probably a short term loan available for it.
Unsecured Personal Loans
The most common form of short term loans is the unsecured personal loan. Short term unsecured loans are usually given by lending agencies to loyal customers with the longest financial histories and the best credit, but many are also available for those with poor credit in desperate situations. They can be anywhere from a few hundred dollars to several thousand depending on the reason for the loan and the risk involved for the lending agency. These loans do often come with high interest rates, but because they are paid off within a much shorter time period than regular large scale loans, the relative cost is much lower over the life of the loan.
Short Term Loans
If borrowers do not quite have the credit history for unsecured personal loans, they can qualify for other types of loans. Short term loans, for instance, do not require any credit history. These loans are drawn against the borrower’s salary instead. Borrowers submit a recent paycheck and depending on the size of their regular salary will be approved for a small loan to be paid back when the borrower receives his or her next paycheck. There may be fees or interest rates charged and the loan may sometimes be extended depending on the individual lending agency and their particular policies, but for the most part these loans are very small and must be paid in full within a month of receipt.
A third type of short term loan is a collateral loan. These loans require borrowers to have something of value that they can risk in order to get a loan. They use this item of value to secure their loan when they promise to pay back the full amount. If the borrower defaults on the loan or fails to pay back the full amount plus any charges or fees associated with it in the agreed upon period of time, the lending agency can take possession of the item. For larger loans, only things like car titles or home or property deeds can be put up for the value of the loan. For smaller loans, the lending agency may accept appraised art, jewelry, or antiques of an equal value.
Short term loans can be useful for getting a family through a rough month, starting up a new business, or a hundred other reasons. Whatever the need, plenty of short term financing options are available for anyone, no matter their credit score, employment status, or financial history.