When Short-term Lending Makes Financial Sense
Short-term loans can be an ideal financial solution in many instances. Before taking out a loan, you should always give serious consideration to why you need the loan and how you can repay the money. In some situations, when used properly, short-term loans can be a relatively smart way to start a new business or support business growth. Homeowners, students, retirees, self-employed and many others can stand to benefit from a small loan when times are tough or emergencies come up. Let’s take a closer look at the advantages of short-term loans and finances.
General Features of Short-term Loans
- Easy Application Process
Unlike banks that want a huge amount of documentation and a long application process, applications for short-term loans are much easier to fill out. Today, many lenders offer convenient online applications, which only take a couple of minutes to complete.
The rigid requirements used with traditional loans can nearly make it impossible to qualify. It is not unusual for people to be turned down for a line of credit from a credit union or traditional bank and still qualify for short-term loans from online lenders. Most online lenders only require a couple of documents, which allows more folks to be approved for loans.
In addition, many online lenders do not require background checks or any kind of credit checks. So, if you have not established a credit history or your credit score is low, it makes no difference in the qualifying process.
- Quick Payouts
Car title loans and payday loans are two popular loan options, which can pay out in as little as a few hours or a day. This is a huge improvement over conventional lenders, which often take weeks to close a loan and payout.
- Short Repayment Terms
Most car title lenders offer flexible loan terms. In some situations, borrowers help to define their payment amounts and a workable payment schedule to meet their personal budget or business needs. In some instances, people only want a small amount of money, which is easily paid off in a month or under a year.
All short-term loans require borrowers to sign contracts according to state regulations. Contracts specify the terms of the agreement in detail, which helps to provide borrowers with a clear picture of their financial agreement.
Short-term Loan Benefits for Personal Use
- Loan funds can be used for any purpose. You could use funds to pay monthly bills if your hours at work have been cut for example. Some folks working on commission like realtors or those in telemarketing sales rely on a short-term loan to see them through until they receive their sales commissions. Loan payouts are also ideal for covering the costs of unforeseen emergencies.
- Small loans can be a good way to repair credit. If your lender reports loan payments to the credit bureaus, you could conceivable improve your credit score by making timely payments.
- Pay off high interest credit cards or loans. If you have one or more high interest accounts, you might save money by paying them off with a short-term loan at a lower interest rate.
- Preventing late payments. Depending upon your budget, you may be able to use your loan funds to make your monthly payments on time to prevent late payments and negative reports to your credit report.
Short-term Loan Benefits for Business Use
- A short-term loan can be an ideal way to cover your start-up costs for a new business. Even if your loan is only a small amount, it may be enough money when combined with any savings you have to get the business going.
- A small loan can be a good investment to cover a new business, which is still struggling to gain accounts or new customers. It could also be helpful when running a seasonal business, which may have periods with less income.
- Loan funds may be used to hire additional employees, purchase more products or buy additional equipment as your business grows.
- You could also use your short-term loan funds to cover emergencies. For example, you may receive a large order and need the money to cover the cost of supplies to make your products.
Before taking out any type of loan, it’s smart to weigh the pros and cons. However, short-term loans do have their place and could be the smart solution to financial issues.