What is a Short-Term Loan?

Facebooktwitterlinkedintumblrmail

What is a Short-Term Loan?

A short-term loan is where the principal amount has to be paid within a short period of time and often less than a year.

short term loan

veteranstodaymoney.com

Short terms loans have been designed to cover gaps in cash flow and to also provide much needed funds in the case of an emergency. As the term of the loan is short, the interest rates on this type of loan are a lot higher than a long-term loan.

Short Term Loans for Individuals

Short-term loans for an individual are designed to provide money in between paychecks, to cover the expense of an emergency, a medical expense or even the cost to have your car fixed.

There are some banks and credit unions that offer short-term personal loans, but the more common source for this type of loan is a payday lender.

A payday lender will offer short-term cash advances for until your next paycheck.

Payday loans to carry high interest rates and are strictly governed by states in regards to their terms and conditions.

Credit cards are not referred to as short-term loans, but they operate in a similar way. With a credit card you will only pay the interest on your credit card balance if you do not pay the balance in full at the end of the month.

Short Term Business Loans

Banks may offer short-term business loans to provide finance for startup, to fund a new project, to pay for an emergency or to cover a gap in cash flow.

What to Know About Short Term Loans

Short-term loan terms and conditions will vary, but one constant is there high interest rates.

The higher interest rate is due to the principal not being held on to for a long period of time, so the lender has to charge a high interest rate in order to cover the risk of issuing the loan.

Short-term loans can be become dangerous if you are not able to pay it back on time and this can lead to more interest and fees.

You will need to do your research and know the costs involved before you take a short-term loan.

Simple Ways to Recover from Debt

Facebooktwitterlinkedintumblrmail

When you are in debt it can feel overwhelming and can be hard to know where to start in order to get yourself back on financial track. Getting out of debt will not happen overnight, but it is possible to recover from debt with just a little planning.

Recovering from Debt

debt

The first step in recovering from debt is to first assess how much debt you are in. Gather all your bills and write these down in a notebook. This will give you a better view of how much debt you are carrying and you can also start to plan how to get out of it.

You are able to approach your credit card company for some help by calling them. They  may lower your interest rate, which means that there will be less debt and you will have more money available to help pay off your debt.

When you are in debt you will need to start watching what you spend and tighten your wallet. Have a look at what you spend your money on and see where you can cut back. You can do without your morning Starbucks coffee for instance and save money there. If you aim to get out of debt then you need to stop creating it.

A credit counselor is also a good option. A debt review company will be able to help you consolidate your loans and show you which debt you should pay off first. Many people in debt find credit counselors to be of great help as they are able to set out a specific plan that contains variables that the individual may not have thought of.

It is a good idea to make the switch from plastic to cash. When you have cash you are more likely to spend less as you are only able to spend what you can afford. If you have the will power you should cut up your credit cards or put them away. If these are not on you then you can’t make more purchases with them.