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!