For most of us, a loan means a huge amount that can be repaid back in equally long tenure like 20 to 30 years. However, other types of loans also exist which can take care of your immediate needs like probably a vacation expense or an emergency bill. You can then later pay off this loan in a short period. Termed as short term loans, their working principle is different from their long term counterparts.
What does short term mean?
Working as an interim solution to all kinds of your immediate monetary requirements, short term loans are generally required to be paid within less than a year. It is popularly referred to by many names like cash loan, pay loan, salary loan, etc. Most of these loans are generally for about six months though you can find eight months or nine months as well.
Collateral considerations
The value of a short term loan is often much smaller than the long term loan. Thus, they do not require high value collaterals or even a good credit score. Predominant of these loans are unsecured. If at all, security is required, people often place a smaller value possession like a car as collateral. Most often lenders do not run a full background check of the borrower to verify if he would be able to repay the loaned amount. A relatively good standing with the bank, a steady income source, and proper identification papers do the job for you.
Interest rates
The interest rates here are not static and depend on number of factors like the amount taken as loan, the period for which it is taken and whether any collateral has been placed. Another factor influencing is whether you are taking it from a government authorized body like a bank or via some private lenders.
The working mechanism of getting the loan
The mechanism of getting a short term loan is pretty easy. All you need to do is review the lending criteria and loan fees of reputable banks and lending bodies on the net and apply for the ones which you think are closer to you for your requirements. You can now apply online for them as well over the phone. Usually, you receive approval of it on the same day, and the loan can be collected on the same day or next day as the case may be. After this, you can repay according to the terms of the loan or even faster.
