Short term finance loans are a great way to get access to financing when you don’t want to take out a long-term loan. Term loans can be extremely lengthy, which leaves you with a prolonged debt burden that can end up impacting your financial situation long into the future. While credit cards have been a popular form of short-term borrowing for the past few decades, personal loans are now becoming popular again.
They’re a great way to borrow money and set up a structure for paying it back. But as mentioned previously, many long-term loans can take years to pay off. If you want a quick injection of capital, it’s good to set up a short payment period to help you ensure that you don’t accumulate more interest payments.
This guide has been compiled to provide our readers with a comprehensive understanding of what micro loans are. If you’ve heard of this financial product, but you find yourself confused by it, this article is perfect for you. In addition, if you’ve never heard of micro loans, but you’re in the market for a small amount of financing, this article will also be perfect for you.
Make sure to read all the information in this guide prior to making any financial commitments. It’s important that you’re fully aware of the prospective financial products that you’re considering.
What is a Micro Loan?
A micro loan is a form of personal loan. It is simply a small personal loan that is borrowed by a person to cover a cost. Micro loans are a very basic product. Below we will outline some features that are included in micro loans:
- Term Loan – A micro loan is a term loan, which means it is paid back over a certain predetermined period of time. You will not have flexibility in terms of payments. You will be required to make monthly payments of the same value until the loan is paid in full.
- Fixed Interest – Micro loans are typically very short term, for this reason they are often fixed interest.
- Small – Micro loans are very small, the exact amount you can borrow will be explored more further on in this article.
It’s important that you don’t get personal micro loans confused with business micro loans. The U.S. Government has a business initiative to help small businesses obtain small loans. A lot of the information that you find on the internet will be about micro loans for businesses – always ensure that any advice you are receiving is geared towards consumer based personal loans.
Micro Loans Are Typically Unsecured
Because micro loans are so small, they also tend to be unsecured. This is because lenders try and take as much administrative cost out of the loan as possible. It’s easier for them to just charge you a higher interest rate and take on board the risk that you may not pay back the loan. This is a great benefit to the borrower, as there is much less risk involved for you. You won’t have to worry about your valuable assets being seized if you default on the loan.
This being said, not paying back your loan will still impact your credit score. You need to make sure to pay back the micro loan on time and in full. You should never put your financial future in doubt by destroying your credit rating. A micro loan is typically a very small amount of money, it’s not worth creating problems for yourself in the future.
Short Term Loan Rates
Short term loan rates will depend on the type of lender that you decide to work with. This being said, for the most part, short term loans carry much higher interest rates than other forms of financing. This is because short term loans are on offer to people with lower credit scores. In addition, because the lender doesn’t benefit from money being accumulated through long-term interest rates, they want their short term loan rates to be higher.
Lastly, because short term loans are unsecured for the most part, there is quite a bit of risk involved for the borrower. This is one of the major reasons you see such a large interest rate hike when it comes to this form of finance. In some ways, this has obvious benefits for the borrower – you won’t have to worry about having personal property claimed by your lender if you end defaulting on the loan. Short term loans with low interest rates are extremely difficult to find.
Short Term Loan Poor Credit
Getting short term loans with bad credit is actually sometimes easier than obtaining long term loans. This may sound strange, but short term loans are considered easier to predict by lenders. This is because short term loans don’t occur over as long of a time as long-term loans. If you get a mortgage, the term time is usually 30 years. This means that it’s hard for the lender to predict what may happen in that 30-year window in terms of your financial situation. In addition, interest rates can vary massively over such a period, making it harder to assess the viability of the loan.
To apply for a short term loan with bad credit, you’ll want to try and raise your credit score slightly more before you head to the application portal. While many lenders do accept poor credit for short term loans, it’s still best to prepare yourself as much as possible. Check out below for two quick ways to raise your credit score before you apply.
Pay Off Credit Card
If you have any spare capital, paying off some of your credit card debt can have a profound impact on your credit score. This is one of the major determinants of your current credit rating, so reducing you credit card debt levels is one of the quickest ways to have an impact on your score!
Check Your Credit Report
Most people know their credit score, but few check their credit report. Make sure to check your report before you apply and ensure that there aren’t any mistakes. Credit report errors are way more common than you think!
Short Term Loan Advantages and Disadvantages
Deciding between long term and short term loans can be difficult. That’s why it’s always good to have a full look at the benefits and drawbacks of this form of finance. If you want to make sure that you get the best financing possible, make sure that you consider the good and the bad before deciding what’s right for you. Check out our information below.
Short Term Loan Advantages
- Quick – Most short term loan lenders will be able to get you money extremely quickly. The loan application process is typically extremely short, as well as the time it takes for them to get the money into your hands. This is one of the easiest ways to get access to capital quickly!
- Short Term – A short term time means that you won’t have long debt obligations that impact your future financial viability.
- Bad Interest Allowed – If you have a low interest score, a short term loan will typically be one of the easiest ways for you to receive capital. It’s a good way to get back on track in terms of building your credit for the future!
- Variety of Lenders – Fortunately, there are a variety of lenders to choose from when it comes to short term loans.
Short Term Loan Disadvantages
- High Interest – The major downside to short term loans is the fact that they have high interest rates. It can be a total pain having to take extra interest payments on board, but the short term nature of the loan helps offset some of this.
- Low Amounts – If you’re looking to borrow a large amount of money, this won’t be the best lending choice for you. Short term loans provide individuals with small amounts of money to cover immediate costs.
Where to Get Short Term Loans
If you want to get a short term loan, you actually have a few options at your disposal. The lender that you will want to use will depend on the preferences that you have in terms of financing. There are three primary options when it comes to short term loans. We will explore these options in further detail below. Make sure to consider all your potential avenues before you make any decisions.
Short Term Bank Loans
Not all banks will offer short term loans, but there are a few that offer short term bank loans. If you have a good credit score and you want to work with a lender that will provide you with a low interest short term loan, this may be your best option. Traditional banks are often much more risk averse than other lenders, so they will tend to offer you lower interest rates. For this reason, they are harder to be approved through.
If you want online capabilities, make sure that the lender you work with has a suitable platform. Some modern lenders are woefully behind their online counterparts when it comes to online capabilities.
Online Short Term Bank Loans
One of the most popular forms of short term loans is online short term loans. These loans are provided by numerous online lenders. The main benefit of using online lenders actually comes from the application process. If you need immediate short term loans, this will be a better option. You can apply in as little as ten minutes, which is a great advantage for those who don’t have a lot of time on their hands.
Instant short term loans are not available through traditional lenders. But online lenders will often give you a decision in just moments. They also tend to be able to transfer money into your bank account within 24 hours of being approved. Lastly, they typically have good online capabilities. This is great for those who want to be able to easily view all their information in one location – it also reduces the chance that you miss a payment and damage your credit score!
Peer to Peer Short Term Loans
Peer to peer loans are loans that are lent to you by another consumer. These consumers are typically investors looking to make returns on their capital. There are online platforms that allow the investors to provide you with capital over a secure network. These loans are typically quick short term loans – you’ll find out if you’ve been approved instantly.
The only downside to this type of loan is that interest rates can be very high and the amount you can borrow is very small.
After reading this guide, you probably have a pretty good idea of what type of short term loan is the best short term loan for you or your family. In addition, you should have a pretty solid grasp of how to get a short term loan. This is the perfect financing solution for someone who needs quick capital to cover immediate costs.
Choosing the right lender can be hard, that’s why we’ve created a list of the top short term loan companies on the market. Head to our homepage to see which lenders are currently the top performers in the industry.
Be careful when trying to find the right finance for you and your family. Steer clear of short term payday loans – they’re provided by predatory lenders that charge extortionate interest rates. You want to make sure that you’re not putting yourself in a situation where you will fall into a debt trap that you are unable to escape. It can have a profound impact on your future financial situation. For this reason, always work with a lender that is recommended to you by a reliable source!
Short Term Loan Basics
Short term loan is one of many types of loans available to borrowers. If you are trying to decide if this is the ideal type of loan for you, check out this list of commonly asked questions and their corresponding answers.
What is an example of a short term loan?
A short term loan is any type of loan that is payable within less than one year. This type of loan is typically offered by banks and credit unions.
What is a short term loan called?
There are several types of short term loan. The term payday loans or short term cash loans can refer to this type of loan.
What is a short term personal loan?
To define a short term loan, it is a loan provided by banks and credit institutions. The amount is generally lower (anywhere from $1,000 to $5,000) and must be paid in a short period (such as less than a year).
How short is short term?
The shorter repayment period is the distinctive feature of a short term loan. By definition, it is any type of loan that is payable in less than 12 months or a year.
What are the advantages of short term loans?
Since the loan is paid off in a short term, you can expect lower interest on the loan amount. The application process is also less stringent, which means that the funds are released over a short period of time. There is also no need for collateral.
What is short term borrowing?
Short term debt is any type of loan that is due within a year or less. Borrowers can take advantage of this type of loan to cover for current liabilities or improve operational cash flow.
Do short term loans have higher interest rates?
The average APR on a loan is anywhere from 390% to780%. Short term loans have an APR of 400%. In comparison to long term loans, short term loans have higher interest rates.
What is short term bank loan?
Short term bank loans are loans provided by commercial banks for whatever purpose the borrower intended for. This loan must be paid off in a year or less.
How do short term loans work?
Short term loans provide financial solution when you have minor cash flow problems. It can cover unexpected bills and expenses. Unlike traditional bank loans that are paid over several years, a short term loan is payable within a year or less.
What are the advantages of short term loans?
Short term loans offer many advantages to borrowers such as quick access to funds, the lack of collateral, and quick boost to your credit score (if you can pay it off within the short term loan period).
What are short term loans used for?
Short term loans can be used for a variety of purposes. For individuals, you can use it to cover for unexpected bills and expenses. For businesses, you can use it to pay off liabilities or improve cash flow.
Which institutional lender makes short term construction loans?
Most lenders – locally or online – can provide short term construction loans. If you need additional fund for the construction or renovation of your home, make sure you research and compare among top lenders.
How to calculate interest on short term loans?
To determine the interest rate on short term loans, most banks and credit unions use this method: multiply the interest rate on the loan to the principal amount of the loan, and then multiply the sum with the term in units of years. Divide that number by 100 to determine the interest rate on your short term loan.
How to record a short term loan in Quickbooks?
To input your short term loan to Quickbooks, click on the Gear icon and find Chart of Accounts under Your Company. Select New and choose Other Current Liabilities under the Account Type section. Choose Loan Payable as the Detail Type. Put in the information regarding your short term loan.
Are short term loans current liabilities?
Yes. Short term loans, or any type of short term debt, are recognized as current liabilities.
Do commercial banks give short-term loans?
Yes. In fact, short term loans offer the highest interest rate and is the reason why commercial banks prefer to lend them.
Are short term loans income?
No, it is not classified as a type of income. However, short term loans are able to resolve issues on cash flow.
Why short term loan have higher rates?
Short term loans have higher interest rates in comparison to long term loans. Since the loan is paid over a short period of time, a higher interest rate is placed on the loan to mitigate the risk of a shorter yield curve.
How short term private loans are calculated?
Since a short term loan is paid off monthly, it is divided according to the number of months of the loan term. The interest rate is also integrated into the calculation so that the total amount you will pay over time will include the interest rate (on top of the principal loan amount).
How to calculate a short term loan?
A short term loan is calculated by multiplying the total amount of the loan with the interest rate for that loan. That number is divided by the number of payments that are made within a year.
Will a short term installment loan help build credit?
Yes. If you have a credit card with a high level of credit utilization, you can take out a short term installment loan to pay off your credit. When you pay off your credit card balance, you can improve your credit score significantly.
How to calculate APR on short term loans?
You must divide the finance charge on the total loan amount. Multiply the quotient by the number of days in a year. Divide the amount according to the term of the loan (such as how many months it must be paid off). Multiply the resulting amount by 100.
How much is a short term loan?
When you apply for a short term loan, you can get anywhere from $2,500 to $250,000. The approved amount will vary according to the purpose and the term length.
Types of Loans
Whether you are looking for a short term loan or a long term loan, this section will discuss in more detail the answers to commonly asked questions about these different loan types.
What is considered a mid-term loan?
Mid-term loan, also known as medium term loan, is any type of loan that is payable within 1 to 5 years.
What is a mid-term loan?
A mid-term loan is defined as any loan that matures anywhere from 1 to 10 years (maximum). This type of loan should be paid off within that time frame.
How many types of term loans are there?
There are three general types of term loans that you can apply for. The first one is a short term loan, which must be paid off in less than a year. The next one is the medium term loan, or loans that are payable in up to 5 or 10 years. Lastly, there is the long term loan that can be paid for an extended period of time, such as up to 20 to 30 years.
How long is a long term loan?
A long term loan is any form of debt that is paid off over an extended period of time. This type of loan can have either a fixed interest rate or floating rate depending on what you and your bank would agree on.
What are the benefits of a long term loan?
There are several benefits of choosing a long term loan such as affordable monthly payments, lower interest rates, and improved cash flow.
What is a short term bridge loan?
Bridge loan is a type of short term loan. It is a type of loan that is taken out on the borrower’s existing property in an effort to finance the purchase of a new property. It is known by other terms such as gap financing or swing loan.
What is a short term cash loan?
Short term cash loan is a type of quick cash loan. Borrowers can get typically a small amount of cash ranging from $600 to $2,000. It must be repaid within a period of 6 months or less. It is used to cover for unexpected expenses or emergencies.
What is the best short term loan?
There are various types of short term loans to suit your varying financial needs. Therefore, it is important to obtain quotes from various loan providers to see which of them offers the best rates on a short term loan.
Is bank overdraft a short term loan?
A bank overdraft is a limit placed by your bank on your current account. The amount limit set on your overdraft could vary on a day-to-day basis. The interest rate of an overdraft is higher than a bank loan.
Who makes short term construction loans?
If you are in need of funds to finance your renovation or construction project, a short term construction loan is a viable option. However, you need to thoroughly compare your options as they are typically charged with higher interest rates.
What is long term loan and short term loan?
Long term loan is a debt that is paid off at a lower interest rate for an extended period of time. On the other hand, short term loans have a shorter repayment period, which is why it tends to have a higher interest rate too.
What is a short term loan for college?
Short term loans are also available for students. They can be used to cover for your financial needs while in college. They can be anywhere from $50 to $2,000.
Which farmer loans are short term?
You can approach your nearest bank or loan provider to inquire about farmer loans. You can find agricultural loans or lines of credit that can be used for seasonal business needs.
Short Term Loan Application
Want to apply for a short term loan? In this section, you will learn about the frequently asked questions and their corresponding answers that relate to the process of applying for a short term loan.
How can I get a quick loan?
You can go to a credit union or online lender to obtain a quick loan. Quick cash loans are typically released in 24 hours or less.
Where to get a short term loan?
Short term loans are offered by nearly all types of loan providers. You can visit a lender in your local area or look for online loan providers.
Where to get a short term loan with bad credit?
If you need to apply for short term loan but you have bad credit, find lenders that specialize on people with bad credit. It will improve the chances of your application getting approved. If possible, find a co-signor too.
How to apply for a short term loan?
To apply for a short term loan, first you must find a provider of short term loans locally or online. Get quotes from various lenders so you can compare their rates and find the best option. Make sure you comply with the list of requirements and you can get your funds when you need it.
How to get a short term loan with bad credit?
Compare lenders that offer short term loans for people with bad credit. They are difficult to find but not impossible. Check their list of requirements if they could approve your loan application. In most cases, you can get a short term loan without a need for collateral.
How to get a short term loan fast?
If you want to get approved for your short term loan fast, you need to look for lenders that specialize in or offer short term loans. Comply with the list of requirements to ensure that your application won’t be denied.
How to get a short term loan with no credit?
While it is possible to get a short term loan with no credit, it is challenging to get approved. Borrowers with no credit are considered a risk. It can be a challenge to not get declined.
How to get a short term personal loan?
If you are looking to apply for a short term personal loan, you can go to financial institutions like banks and credit unions. They offer short term loan if you are in need of immediate cash. You can also apply for short term loans online – if you can find a reliable online lender.
Does Wells Fargo do short term loans?
Only Wells Fargo customers with a checking account are eligible for a short term loan. Once approved, the amount you loan is directly deposited to your account.
Does Chase Bank do short term loans?
Chase Bank does not grant personal loans to individuals or businesses, regardless of the credit. You can, however, apply for unsecured online loans if you need short-term or immediate cash assistance.
Do short sales qualify for USDA loans?
The only requirement for USDA loan is that you must be the one to occupy the home being purchased. It does not matter if the property is being sold on a short sale.
Where can I get an easy short term loan?
There are several lenders online and locally that can provide short term loans. It is one of the most common types of loan that are obtained by borrowers. Hence, there are also several lenders that can offer them.
What to look for in a short term loan company?
When choosing where to get your short term loan from, make sure that you compare the quotes provided by various lenders. Choose according to which company can offer the most competitive rate and has the best terms.
What's better pawning or short term loan?
It depends on your needs. If you own something of value, you can pawn the items and get compensated for a percentage of the item’s value. The downside to pawning is that you won’t get the full amount equivalent to the value of the item. On the other hand, short term loans will provide you instant access to cash when you need it, but might be difficult to qualify when you have poor or no credit.
Christine has a solid background in personal finance as she spent the last eight years working at one of the biggest banks in the US. She managed her own team of financial advisors that helped hundreds of people with their financing needs. Her innate understanding of different financial products and loans helped her move up the ranks quickly after graduating with a degree in Business Administration.