People borrow money for diverse reasons. While some people take advances for emergency health needs, to cover monthly deficits, or to pay up credit card debt, others do so to finance home improvements, car servicing, among other needs. It’s unarguable that short-term loans are lifesavers in these scenarios.
There are several types of credit facilities that individuals can apply for, but the most common and accessible are short-term loans. Examples include; payday loans, lines of credit, and installment loans. Getting an online personal loan from CreditNinja and other online lending institutions is usually easy and straightforward. Unlike banks, these institutions don’t require a lot before approving customers’ applications.
Over the years, there have been various debates on the pros and cons of long-term and short-term loans and which option is great for borrowers. In most cases, borrowers’ choice depends heavily on why they need the money, when they need it, how fast they want it, and how soon they can pay it back. In the end, many people settle for short-term advances due to their ease of access. But apart from this apparent advantage, this article will discuss why this form of loan might be a great choice.
What are Short-Term Loans?
True to its name, it’s a type of advance you pay back within a short period. You can get it to support an urgent need, whether for personal purposes or an immediate business need. Its payback time usually ranges from six months to a year — and sometimes, 18 months from the time of getting the facility.
This is perfect if you need an urgent but small amount of money. A regular short-term loan ranges between $100 to $100,000. And unlike long-term loans that last years with stifling payment schedules, this form of credit financing gives you the opportunity to pay back at your own pace, but within the required time frame.
Some examples include:
- Payday Loans
This loan requires that you pay back on your next paycheck. This is one of the most common short-term options, and you can secure it quickly. Since it’s a paycheck advance, many lenders usually withdraw the whole sum from your account within a month of borrowing.
The only downside of this loan is that it usually comes with high-interest rates. However, it’s one of the most accessible credit facilities to secure, especially if you don’t need to borrow a lot of money.
- Installment Loans
Installment loans are quick online cash that doesn’t even take an hour to get into your bank account. It allows for a longer payback period than payday and other forms of loans.
You can pay back within months and, sometimes, over a year. Its advantage is that it’s accessible, available, and less stressful.
Why Taking Short-Term Loans is Smart
1. You Get the Funds Immediately
Many people borrow money for urgent needs such as paying school fees and fixing their cars. One of the numerous advantages of short-term loans is that you can get approval fast and get the money in record time to deal with your urgent needs.
Most long-term loans are saddled with long-term processes that sometimes take days or even months before you can get the cash. This might mean you won’t be able to solve your pressing needs immediately.
2. No Rigorous Process Involved
Since these loans usually involve smaller amounts of money, acquiring them is less complex. They usually require basic personal and financial information; you can skip the hard part. They are also primarily unsecured, meaning borrowers don’t require collaterals to secure them.
This typically equates to less paperwork and a faster lending process. If you need quick money, you can log into your chosen lending platform, pick an amount, and get credited, although you might need a good credit score or a guarantor to get the loan. It’s also important to note that if you’ve borrowed money before and paid it back on time, it boosts your credit score for future lending.
3. Paying Back Doesn’t Take So Long
One of the disadvantages of long-term loans is that it takes a long time, sometimes years, to pay back the advances. This means you could be stuck with a repayment plan for many years, sometimes into your retirement years. This could have psychological impacts, and the interest rates are also accumulating.
Taking short-term loans means you don’t have to deal with that. It means you can pay back within a short period, especially if you don’t borrow more than you need. This will also mean you can take other forms of credit facilities for other needs.
4. There are Several Options Available to Borrowers
Like for example on CreditNinja, you can access most lending companies with your smartphone, which makes credit financing easier.
Ideally, individuals don’t need to go through stringent applications, and hundreds of options are open to your applications. These lenders only need your credit score, a guarantor, and account number. It’s a bonus if you have a great FICO score, and if you don’t, you can use this chance as an opportunity to boost it through early payments.
5. The Interests are Lower
Yes, short-term loans also have interests. However, these interests are relatively low compared to the long-term options. Here’s how it works; interests are spread out across payment periods, and long-term loans have a lot of time to accumulate interest on your money.
It’s different when you pay back within a short period; the interest is lower and can also reduce if you choose a smaller time frame for your repayment plans. Ultimately, you will be paying lower than someone with a long-term credit repayment.
Final Thoughts
Short-term loans are the best fit for small businesses, individuals needing urgent cash, and borrowers with not-so-great credit scores. Suppose you fall into any of these categories, taking this form of credit facility might be the smart call to make, considering the many advantages that come with it, such as quick approval, less stringent requirements, lower interest rates, increased options, and more.