From time to time I need money when I don’t have it. But it does not stop me from purchases I need. How do I manage to do this? My answer is – short-term loans. Where can I get them? There are basically two options:
- Lending companies
What are the differences between them, their advantages and disadvantages? Let’s discuss this in the article.
Where is it better to take a loan?
Short-term loans are issued by banks and lending companies, however, banks in this category include loans issued for a period of up to 1 year. Lending companies with sure approval are characterized by issuing loans for a period not exceeding 30 days, therefore here a loan of 7-10 days is called short-term.
Another difference exists in the form of issuing funds – a client can receive short-term loans from banks in the form of cash, issue a credit card or a target loan for the purchase of goods. In microfinance organizations, cash is issued only in cash or by money transfer using the details specified by the borrower.
When you make a loan in a bank, you will have a long bureaucratic procedure. In a lending company, it takes much less time to get an application approval, but if you compare the interest rate, then lending companies will clearly not be the best solution.
A clear advantage of microfinance organizations is the ability to apply for a loan online – you can slowly get acquainted with the various offers and choose the most attractive conditions. There is no need to visit the office of the company and stand in long queues; it is enough to indicate passport data and an identification code so that in a few minutes or a couple of hours you can become the owner of the required amount.
How profitable is this type of lending?
Obviously, a short-term loan is very convenient for those who urgently need money and who are not afraid of high interest rates, large monthly payments. There are situations when the interest rate is less important than the speed of receiving money, for example, if you need to pay for an operation or pay for repairs to broken home appliances.
Short-term loans are is a great opportunity to buy a last minute, get a child ready to school, get the necessary funds for a wedding or a funeral. But the client should realistically assess their strength and capabilities in order to prevent late payments. High interest rates of this type of lending themselves are not very scary, because the loan repayment period is small. However, negligence in the payment of a loan will result in a rapid increase in debt, to which penalties will also be added.
Although this form of lending obviously assumes a short period of use of money, it is in your interest to shorten this period as much as possible. In this case, high interest rates will no longer be burdensome for your budget, and you will be able to insure yourself against possible force majeure circumstances.
Many people are frightened by the high interest rate, and they prefer long-term loans. However, this advantage is extremely doubtful – the longer the use of other people’s money, the higher the total amount of overpayments. In any case, before contacting financial institutions, analyze your income and calculate the cost of paying the loan.