Applying for a loan is a decision that is driven by several different factors, but it is sadly not as simple as ‘applying for a loan’. There are other aspects that you will need to determine, such as the length of the term, the amount of money to borrow, and the interest rate at which you’ll have to pay back the money.
Picking one type of loan can be quite challenging and daunting. If you’re feeling stuck, it is very helpful to gather some additional information about what options you have and their pros and cons. Nowloan.co.uk, for example, can match your details against more than forty direct lenders so that you can find the best quote.
In this article, we’ll review the characteristics and advantages of short-term loans.
What Is A Short Term Loan?
First of all, let us define what a short-term loan is. A short-term loan is a type of credit that usually needs to be returned within six months to one year and which is attached to a certain amount of interest. Lending over longer periods falls under the categories of medium- or long-term loans.
Such an option is valuable, especially for small businesses and start-ups, or simply individuals not eligible for a credit line from banks.
What Are The Advantages of Short Term Loans?
By choosing to take a short-term loan, you’ll have to pay it back relatively quickly, meaning that you’ll also have to deal with less interest to pay. Even with higher interest rates compared to a similar longer-term loan, in the long run you’ll save money as the period will be shorter.
Additionally, such loans do not typically include having to provide collateral, meaning that you won’t have to ‘tie up’ any of your properties.
Another big advantage of short-term loans is that because of the short period during which it will have to be repaid, you’ll be able to easily organise your finances to meet your installments. Also, you will be less subjected to drastic changes in the economy. With longer-term borrowing, on the other hand, your chances of being exposed to unexpected economic stresses such as a spike in interest rates or unemployment are much greater.
Furthermore, the stress attached to owing money for a long period can have a negative effect on some borrowers. When deciding to borrow money over a shorter period, you are less likely to become overly stressed and anxious about your current or future financial situation.
If you have a bad credit score or history and are looking to improve them, borrowing money over a short period and paying it back on time is a good move. It is a great strategy for obtaining fast and effective results on your score.
Is A Short-Term Loan Good For Me?
If you need quick money, you should seriously consider going for a short-term loan. Longer-term borrowing usually means secured loans, i.e., they involve putting forward some kind of security or collateral such as your home.
Short-term loans, which are more likely to be unsecured, are over more quickly, which most borrowers prefer. An unsecured loan is one for which the borrower does not neet to provide collateral.
Interesting related article:
- “What is a Secured Loan?”
- “What is an Unsecured Loan?”
- “The definition of a Personal Loan.”