Short Term Loans
Ins and outs of short term cash loans
People often need to take out loans for a short period of time (as short as 14 days) to handle unexpected financial emergencies such as college admission, car repairing, home repairing or paying medical bills. These loans are commonly known as short term loans. To be more precise, a short term loan can be defined as a loan which is offered by different financial institutions including banks, credit unions, colleges and payday lenders for a short time-span. The time frame, however, differs from lender to lender. Some lenders require the borrowers to put up collateral as security for the loan, while others don’t. However, short term loans without collateral are charged with higher interest rates, for example, payday loans.
Short term loans – Features
Here are the basic features of short term loans.
The time-frame for short term loans usually ranges from 14 days to a couple of months.
Short term loans are generally rapacious in nature and often come with higher interest rates than traditional loans.
Both conventional and unconventional lending institutions offer this type of loans. However, the chargeable interest rates differ from lender to lender.
The loan amounts for short term loans also differ from lender to lender.
Short term loans – Effects
Short term loans are usually charged with exorbitantly high interest rates (especially in the states where there is no restriction on APR) so much so that the borrowers often need to pay more than 2 times of the actual loan amount. In most cases, paying off the loans becomes really difficult, sometimes impossible, for the borrowers.
Short term loans – Drawbacks
Due to some basic drawbacks, the borrowers avoid such loans, unless they are in very urgent need of money. And as a result, the lenders sometimes face difficulties in getting customers. Here are the drawbacks of short term loans.
Since the principal loan amount is small ($100 to $500), any additional fee like an origination fee comes as a large percent of the actual amount.
Since the loans are served for short period of time, the interests due on the loans compound very fast making the APR extremely high.
Short term loans – Laws
When it comes to short term loans, every US state has its own laws. Due to the predatory nature of the loans, most of the states impose upper caps on the interest rates or the annual percentage rate (APR). For example, in 10 US states as well as The District of Columbia, the lenders of short terms loan are prohibited to charge more than 30% as APR. Not only for the lenders, there are restrictions for the borrowers too. Most US states impose caps on the number of outstanding loans. The borrowers’ ability to extend or roll over the loans is also restricted by laws.
Short term loans – Application procedure
Getting a short term loan often becomes difficult if you don’t know how to apply for it properly. Here are the guidelines for how to apply for a short term loan.
Have your SSN ready – You must know your Social Security Number (SSN). Have your SSN ready as you will need it while filling out your loan application. You need to provide your SSN along with name, residential address, contact number and your employer’s contact information while applying for the loan. You also require furnishing photo identification proof like your driving license or passport at the time of filling out the loan application.
Prepare income proof documents – You must have income-proof documents prepared as you need to furnish them while you apply for a short term loan. The documents may include your pay stubs, direct deposit forms and bank statements. Some short term lenders require their customers to furnish their checkbook.
Read the offered documents – You must read the offered documents as well as loan terms very carefully before you submit the loan application. You should also clear the doubts, if any. Since short term loans are charged with higher interest rates, you must verify the interest rate along with other fees. Unless the loan terms and the interest are acceptable, you shouldn’t fill out and submit the loan application.
Answer honestly – While filling out the loan application, you must answer to all the questions honestly. It is unlawful to get a loan by deliberately providing wrong information.
Short term loans – Cautions
If you’re going to take out a short term loan from an online lender, you must check some factors.
Check the legitimacy – Before you apply for an online short term loan, verify the legitimacy of the lender. Check if the official website of the lending company is secure and legitimate. Better Business Bureau (BBB) accreditation ensures legitimacy of a website. You must not work with a company whose business is not accredited by BBB.
Avoid spam emails – You may often find a bunch of emails in your inbox offering short term loans. Most of them are spam. Don’t share your information in reply to those emails. It would be even better if you don’t respond to these emails at all.
Avoid payday loans – Payday loans are examples of short term loans. However, while seeking for a short term loan, try to avoid payday loan as such a loan usually comes with very high interest rates along with other expensive fees.
Short term loans come really handy when you’re in dire need of money to cope with immediate cash crunches. However, you should know the pros and cons of such loans before you apply.
For the good rates and favorable terms on short term loans, you can depend on us. We are always there to help you meet your financial obligations.