Short-term loans are in demand these days due to its own advantages, especially the loan period. Here, you don’t have to pay for years to get the loan closed. Instead, it may range from a few months to a year. This is quite good for the people who are looking to get some emergency loan and don’t want financial burden for long-term.
One of the questions we have usually seen is, people getting confused between short-term loan and generic loan which is usually for longer duration. So, we thought of writing a detailed post on when to consider a short-term loan.
Here, I am going to talk about some top factors you are looking for a short-term loan-
#1 Looking for immediate capital for small business
Let’s say you are looking to start a startup, or a small business, and you need some capital. In such case, short-term can be one of the best loans to get quickly which you can pay quickly as well. Short-term loan is similar to personal loan only when you are looking to get at a personal level like for some medical emergency or home renovation. When you are going for business related, still you can go for short-term business loan.
Please note, most of the business loans are for long-term and so you should get this clarified when you are availing the loan.
#2 Expecting funds for some time?
Another reason to get the short-term loan can be in the situation where you need some funds immediately but currently don’t have funds. At the same time, expecting the fund in near future, which may be in few days to few months. In such cases, short-term loan is a great solution where you are not bound for long period and get rid of paying EMIs quickly.
For example, let’s say you are looking for $1500 fund for just 9 months. You found a good deal at an interest rate for 10% then you only need to pay $63 as an interest, and you can pay the amount $173 per month to complete the EMIs for nine months. Definitely, the rate of interest depends on your credit score, but usually you will be able to get in this range.
Now let’s talk about some dos and don’t while availing short-term loans-
Dos of short-term loan
#1 Fix your loan amount:
Before even exploring options to get the loan, do an analysis to understand how much amount you really need? If you don’t do that, you may end of taking excessive or less than required loan. Analyze various options like job change, medical emergency, etc. while analyzing the loan amount.
#2 Ensure timely payment
Although we are talking about short-term loan but still you need to ensure timely payment. There are multiple complications if you don’t do so. There will be a bad impact on your credit score, which may create problem in your further financial credit.
Don’t of short-term loan
· Don’t be over ambitious-don’t exceed the amount if you don’t really need, as this will create some additional burden on your finance.
· Use one loan to pay the other – this is another common issue where people use one loan to pay another. This is a mistake, and you will end up being in a mess.