When you need some sort of financial support to handle a temporary personal or business situation, a short-term loan is what you should apply for.
This type of loan is basically like a credit, and you have to repay the amount along with the interest by the due date, which is typically a year after acquiring the loan.
A short-term loan is an ideal option for small businesses and start-ups that don’t qualify for bank credit lines.
The amount of this type of loan is usually small, and thus perfect for small businesses or individuals who face a sudden and temporary cash flow issue.
How do short-term loans work?
Applying for short term loans is quite simple. Online lenders like LoanPig use an online application for the process. As soon as you fill in the form, a necessary credit check is performed. As the process is computer generated, you can expect to receive a reply within a few minutes.
After the application is approved, money is deposited in your bank account within a few hours, giving you enough time to use the funds quickly and systematically.
You will be required to pay back the amount within the specified period. However, if you can afford to pay it in advance, you can do so as well.
After all, the longer you take to pay back the loan the more you end up paying as interest. So, to avoid additional costs, paying before the agreement ends is a better option.
Why consider taking a short-term loan?
You must be thinking why take a short-term loan when you can acquire a long-term loan and thus take more time to pay back? Well, there are several benefits associated with a short-term loan that does not apply to mid-term or long-term loans. These benefits are:
1. It is possible to acquire this loan very quickly.
A short-term loan is considered less risky. The thing is, it is believed that the borrower’s ability to repay the loan is less likely to change throughout the loan period (which is usually not more than 1 year to 18 months).
This means, the lender’s money is pretty safe and thus these loans are sanctioned within minutes or max hours.
2. Easy to acquire
As this type of loan is considered safe, the requirements for such loans are easier to meet. On the other hand, when you apply for a long term and are borrowing a big amount, the paperwork is lengthy and the overall procedure is difficult as well.
3. The interest amount is significantly less
As payment is supposed to be made within 12 to 18 months, the interest amount and processing fees of these loans are typically lower compared to what you pay in long-term loans.
Lastly, understand that short-term loans in the UK are not a good option only for those who need more funds. However, if you are in some temporary financial crisis, a short-term loan is a great option for you.
Also, consider working with a reputed lender who has been in the market for years. This will ensure you get better interest rates and quick service.