Short-term loans are loans issued for a period of 1 to 3 months. Sometimes this category includes loans for a period of up to 1 year. This form of lending is convenient for the purchase of relatively inexpensive goods, for the purchase of medicines, for weddings or for holiday trips. Short-term and long-term loans have a lot in common, in particular, can be secured by collateral. But between them there are some considerable differences that you should be aware of before applying for a loan. In this article, we will discuss the types of short-term loans, as well as their advantages and disadvantages. Rad the article to make a though-out decision before you apply for a short-term loan.
What are the types of short-term loans?
Short-term loan is a special form of lending, which, in turn, is divided into several types. Each of them has its own characteristics. What are they?
- The usual loan when the solvency of the borrower is certified by income statements and the standard procedure for checking the credit history. It takes several days between the filing of the documents and the decision to grant the loan, but the client can expect high amounts and an acceptable interest rate.
- Express loan, in which money can be obtained within a few hours or even minutes. For the lack of the need to provide a large package of documents, clients of microcredit organizations, as a rule, pay a high interest, but such loans are available even with a not very clear credit history.
- Overdraft – so called small short-term loans, which are usually attached to the salary card and allow you to exceed the balance on the account. When overdraft interest is not charged on the entire loan amount, but only on the used part of the funds. At the same time, interest is automatically deducted from the account, and borrowers do not have to visit the bank monthly to pay off the debt.
Advantages and disadvantages of short-term loans
A short loan period means a decrease in overpayment for using credit funds, but at the same time the amount of monthly payments increases.
Although a short-term bank loan is not distinguished by a large amount of cash issued and is limited depending on the level of customer income, it can be increased if necessary. Choose the longest possible loan period, then with the same level of income, the amount that a bank or a lending company will be able to issue to you will increase. The guideline is your average monthly income – if regular payments do not exceed 50% of your salary, financial institutions will easily increase the amount of financial assistance.
It should be borne in mind that only high-income clients with an impeccable credit history can count on large sums. Although many lending companies online give loans to clients with overdue payments on previous loans, the terms of such a loan are much worse than standard ones.