Emergencies are unprecedented, and even if you’re a pro-money-manager, small expenses like a car repair or plumbing issues can shake your budget. Such unplanned expenses can be challenging to cope with, especially during the ongoing financial crisis due to Coronavirus.
Short term loans can help you tide over a minor financial crunch. Spread the cost of your purchase with a short-term loan and pay it off via easy monthly instalments over a shorter term. Read on to learn more about how short term loans work.
What is a short term loan?
Short term loans are high-cost short-term personal loans that you can use to cater to unplanned or urgent expenses. Typically, these loans are borrowed for less than 12 months. Short term loans tend to have a higher interest rate than typical high-street personal loans. But how high they can get depends on your credit score and affordability.
Decent credit history can fetch you lender offers with relatively lower credit scores. Bad credit score borrowers may find it challenging to qualify for competitive interest rates. But since the interest rates are already high, short term lenders are often more likely to lend to bad credit borrowers.
Since these loans are borrowed over a shorter span, the processing and disbursal are usually speedy. Most lenders would wire transfer the money into your bank account within a few days.
786 Loans is an FCA-licensed loan broker in the UK. With a panel of some of the UK’s leading FCA-approved lenders, 786 Loans can help you find a suitable loan offer, even with bad credit. Fill a quick online application form and compare multiple loan offers to find your ideal loan.
How do short term cash loans work?
Unlike typical personal loans, short-term loans are designed such that they are repaid within 12 months. Here’s how the application process for short term cash loans works:
- Work out a suitable loan amount: Crunching numbers to figure out an appropriate loan amount is crucial for the borrowing journey. Assessing your financial circumstances will help you understand your affordability better. It is always wiser to borrow an amount that you can easily afford to repay.
- Self-assess your credit report: Pull up a free copy of your credit report from one of the credit bureaus to self-assess your financial standing. Self-assessing your credit rating before applying for credit gives you an idea of the offers you can expect from lenders. Knowing your score will buy you some time to either get a guarantor on board or work on your credit profile in general. Besides, a self-check helps you identify and dispute incorrect items of invalid enquiries on your profile.
- Fill a quick online application form: There are two ways of applying for short-term loans – either with a lender or with a broker. The usual course of action for a lender would be to process your application internally. Online loan brokers like 786 Loans, on the contrary, allow you to explore offers from multiple lenders to help you find a suitable one. Plus, loan brokers process your application with multiple lenders simultaneously. This saves your credit score from the unnecessary damage caused by individual credit checks, especially for borrowers with a below-average credit rating. Regardless of the platform that you choose, you should fill the application form meticulously. Errors in your applications can negatively impact the results.
- Compare loan offers: This step is applicable when you apply with a loan broker. After lenders receive your application, their offers will be primarily based on a soft credit check on your credit profile. You can compare these offers based on interest rates and APRs.
- Offer acceptance: When you accept a lender’s offer, the respective lender will run a hard credit check into your credit profile. If approved, you can move on to complete the agreement formalities with your lender.
- Disbursal: Most lenders use wire transfers to send the funds to your bank account. Short terms loans usually have a faster disbursal rate than other credit products. The transfer may still take a few hours or days, depending on the banks involved. Although you are free to use the money at your convenience, you should use it responsibly. Repayment implications go hand in hand with credit. Repayment failures can negatively impact your credit score, diminishing your chances of acquiring credit in the future.
Can I borrow short term business loans?
Short term business loans are financial aid that you can use to finance your business. The term for these loans usually lies between 3 months and a year, within which you should ideally pay off the entire amount. The loan amount that you borrow ranges between £1000 and £1 Million. However, the amount that you can borrow will depend on the following factors:
- The overall financial health of your business
- The lending limit of your lender
- The purpose of your loan and a detailed account of what you will use these funds for.
Interest rates usually vary from one lender to another, but it typically ranges between 5% and 10%.
Different categories of business loans solve other purposes. Here’s a quick overview of the kind of loans that you can borrow:
- Term Loans: Term loans are similar to personal loans. You and the lender mutually work out a loan term, and you agree to repay the loan within this term.
- Asset Financing: Asset financing is a loan that is usually used to replace business equipment, such as computer systems, vehicles or technical paraphernalia, by leasing your assets for a specific time period.
- Invoice Financing: Herein, you can either leverage your unpaid invoices or your accounts receivable value. Banks usually do this by paying a percentage of the invoice at a service charge to help regulate the business’ cash flow.
- Business LOC: Business Line of Credit allows you access a fixed balance of funds that you can at your discretion. These funds help in regulating the cash flow and sustaining any unplanned financial crisis that may arise.
Can I borrow a short term home equity loan?
Most homeowner loans, such as the home equity loan, usually last for a longer-term. If you somehow urgently need to release cash, you can try remortgaging and switch to another deal. Remember not to borrow an excessive amount since repayment failures can lead to the foreclosure and sale of your property.
Short term loans are a quick solution to an urgent cash crunch, albeit at higher interest rates. Like any other credit solution, you should be responsible with your short-term loan repayments to avoid a credit score decline.