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Short Term Loans For Your Emergency
Short term loans are used to cover cash flow gaps in everyday life such as paying for your health or supporting yourself before the next paycheck. The name originates from the repayment period rather than how quick you can access the loan.
Short term loans are loans that are given for a shorter duration. The loan period is usually less than a year( it can range from 3 – 18 months). Some credit unions and banks may offer short term loans but the main issuer of short term loans are payday lenders.
Short term loans are both patronized by individuals and organizations. The loan amount can be authorized within hours and some short term loan companies are open for 24hrs.
Short Term Loans and Pay Day Loans
Payday loans are a form of short term loan. That means that payday loans are under the broader short term loan type. Payday loans offer funds to customers that are in dire need of it. Both short term loans and payday loans have a short repayment time and higher interest rates.
With payday loans, sometimes the one borrowing the money writes a post-dated cheque.
The cheque will include the amount of the loan needed plus the fees charged on it. When the payment time is due, the borrower is expected to visit the office and pay the loan. In case of default, the company will try to redeem the cheque that was written.
If there are no funds, it means the borrower will be charged for having a bounced cheque. He or she will pay additional costs on the loan that was borrowed.
Short term loans in Canada are such that they require those applying to pay an interest on the principal amount. This could be done in shorter repayment periods. Short term loans do not involve large sums of money as compared with other types. It is very easy to get a short term loan than it is to get a long term one.
Short Term Loans As Against Long Term Loans
Both short term and long term loans serve as a means of solving a financial need of individuals or institutions. Despite this fact, they also differ in other respects.
Firstly, when you take a long term loan, you pay off in small amounts for a long time ( some up to over 20 years). With short term loans, the payment duration is as little as 90 days and a maximum of up to 18 months.
Secondly, since long term loans include huge sums of money, the interest rate of the loan will depend on the credit score that you have. If your credit history is good, and you have a stable income, you can get affordable interest rates.
Short term loans have a relatively lower interest rate and the amounts involved are not generally huge.
Application Process For Short Term Loans And Long Term Loans
Also, with long term loans, the process of applying is time-consuming. It requires a lot of paperwork and other documentation that may run into weeks if not months when you apply. A guarantor is needed for the loan application especially in an environment that is not stable economically.
Short term loans have a simple application process and is not time-consuming as compared to long term loans. You can get your loan approved on the same day of applying. The monies can be used to pay for things that happen without warning such as injuries.
Additionally, the more you drag out a loan, the more you pay on it. It’s still better to pay a higher interest rate on a short term loan than it is on long term loans.
Situations That Require A Short Term Loan
Some needs require longer-term interventions whilst some don’t. Below are some of the reasons that call for a short term loan.
1. When you have unexpected expenses
Unexpected expenses can come creeping up into what you have not budgeted for. If the money you have will not be able to cover these expenses, short term loans are the way to go.
For example, if your car can breaks down or you injure yourself and need a stitch or two from the hospital. Your current budget may not be able to cover these emergencies. Such situations require short term loans to enable you to cater for the cost after which you later payback.
2. Paying your bills
As individuals, we enjoy different services in our household. Such services include water, electricity, gas. These services are managed by providers who require payments at the end of the month. When you fall short of payment due to insufficient funds it will cost you more.
This is because you will have to pay for the amount on the bill as well as the late payment fee.
With a short term loan, you will be able to pay your bills on time in the event that you do not have enough funds to pay. This will help you avoid paying hefty sums as a result for the non-payment or late payment of your bills.
3. Paying for education-related expenses
Every now and then, students are in need of funds for tuition, books and living expenses. Students can get aid in the form of short term loans from the student aid office. This allows individuals to take an amount of money and then repay in about 3 months.
The interest rate charged on short term loans for students is very low.
The charges are minimal or non-existent and any charge made is towards the administrative cost of processing the loan. Short term loans for educational purposes also requires that you pay off any outstanding debt and neither go in for a new debt.
If the loan is not paid back on time, a penalty will be applied to the amount. Any interest and penalties are borne by the student. It will also prevent any prospects for the student to get future loans. Short term loans are used regularly by a lot of students during their period in college.
This enables students to focus on their academics mostly rather than juggling several jobs to sustain themselves.
Where To Get Short Term Loans
You can get a short term loan from friends. These are relationships that have been built over the years. You can easily turn to your friend when you are in need of money to cover expenses. There may be little or no interest rate charged on the amount given.
The family can also be an avenue for individuals to gain much-needed finance. In times past and now, it was the first point of call for every financial need. It still serves as a channel by which we can get short term loans to cater for any cash flow gaps.
• Credit unions
Credit unions are member-owned organizations that are established to provide financial help to its members and to improve their financial situation. When you open an account with the credit union, you have a say in decisions that are taken. You can vote in a decision that the board of directors take about the union.
Each member has an equal vote and it does not depend on the amount of money that you have in your account.
It’s been proven that credit unions give superior member services than other lending institutions. The union normally offers unsecured short term loans to its members without doing credit checks.
Due to their not – for – profit agenda, the interest rates charged are very low, there are higher rates on savings and generally lower fees. If you take a short term loan from a credit union, there are flexible terms of payment.
Getting a short term loan from a credit union is worth it as the interest rates charged are relatively low.
The banks as we have them now, have been the major lending institutions for many people when they need short term loans. The banks are profit oriented and hence, the existence of higher lending rates when dealing with them.
Some have complained though that loan application with banks is riddled with bottlenecks. Nevertheless, when in need of a short term loan you can easily fill out an application form.
Your required details to complete the process ( such as payment stub, social security number where applicable) are taken. Once your loan is approved, you will have your funds to pay for that emergency.
Things To Note Before Going In For A Short Term Loan
It is easy to overlook some of the fine details when we are hard up on cash. It is advisable that we read a little more so as to know the terms and conditions before choosing lenders. Some of the guidelines to follow when choosing a short term loan are discussed as below.
1. Read Over The Agreement.
Sometimes, there is not enough time in the day to fulfill our obligations. Due to that we are not likely to read through the agreements that we get into especially when going in for a short term loan. It is advisable that you read through so as to get thorough information on what you’re signing up for.
A lack of reading will mean that you will be ill-advised on the relationship that you’re establishing with the lender. This could be disastrous in the long – run as some salient information that you will need could be overlooked or not read at all.
2. Check Your Eligibility
You have to check if you’re eligible for the loan you are applying for. Eligibility will depend on the maximum age, your financial state and whether you’ll be able to stick successfully to the payment terms put forward. Your bank account details and also if you have a stable source of income will also be checked.
Once you qualify for the short term loan, it will be paid into your checking account.
3. Choose A Repayment Plan
Paying back the loan is as important as the process you went through to get it. It can be embarrassing and negative to your credit if your repayment plan does not work or falls behind schedule.
That is why you have to carefully consider which repayment you’re going to use. A default in repayment can mean taking another chunk of debt which you might not be able to afford. It will then unnecessarily lengthen the period that you should have to repay the loan.
4. Fees: Can I Afford The Loan I’m Applying For?
A good question that any borrower could ask is whether he or she can afford the loan being applied for. To be able to answer this question well, determines how much is needed.
This will also ensure that the loan gotten will not become an albatross on the person’s neck. To do this, you must first know your monthly cash flow by subtracting your average monthly revenue from your average monthly expenses.
The result should always be higher than 1.0 to enable your loans becomes more affordable. In this way, you will always be able to borrow the exact amount that you need to avoid unnecessary debt.
It’s helpful to find out what amount will be charged for the services they will offer you. This will enable you to budget properly to know how that fee differs from the loan amount you’re requesting for. It will help you also have a clearer view of how processes are before signing up for the loan.
5. Credit Score
It’s absolutely necessary to know the state of your credit before adding on further debt. Thus anyone looking for a short term loan should find out how it will affect his or her credit. This will inform him or her what to do and which type of loan they should go in for.
6. What Lending Company It Is
It is important to know the company you’re dealing with. The terms and conditions for the different financial services that are offered vary. You would have to do a search among the different service providers to know their credibility and whether you’ll be able to successfully get the short term loan that you need.
You wouldn’t want to go in for a service provider on your blind side.
Short term loans are usually unsecured in nature and thus do not require collaterals. A collateral is an asset that is normally requested for before a loan is given out.
This normally comes with the longer term of loans though but sometimes some lending agencies will require it. You can ask about it, just to be sure if it is required in your short term loan application.
8. The Amount
Though the loan amount for short term loans is generally not huge, there is the temptation to borrow more. It is advised that you only borrow what you need. This is to enable you to be able to pay back the money borrowed.
If you take a larger sum of money than what is needed, you will be stuck with a longer repayment period. You should bear in mind that the interest rate increases with the amount that you borrow.
Types Of Short Term Loans
• Merchant Cash Advances
Merchant cash advances are a type of short term loan that gives businesses an amount of money against the credit card purchases that will be made. The loan amount given to the business will then be paid back by the lender taking a daily percentage of revenue that comes in from the credit cards.
This is done until the full amount is repaid more quickly.
• Line Of Credit
This type of short term loan allows you to access a determined limit of money. You then pay back the amount of money you spend gradually. The Annual Percentage Rate (APR) on lines of credit are relatively lower. This means you pay a low rate for the amount of money that is borrowed. It’s a great way of building credit and can be used for different kinds of expenses.
Businesses and entrepreneurs can use some of the funds to cater for their operational expenses. This includes paying rent, transporting finished goods etc.
• Invoice Financing
This is where an individual or a business gets financing based on the outstanding invoices that they have. You can get as much as 90% of the amount that your invoice is worth. The interest on this type of short term loan is at a relatively low rate.
The invoices you have serve as collateral and thus doesn’t require that any other assets be added. Also, the rate that you have to pay and how much will be approved depends on the invoice that you have.
At the end of the day when the invoice is paid, the lender takes the amount of money borrowed plus the interest. The remaining amount will be the credit to the business or individual.
Benefits Of Short Term Loans
1. Quick Access To Funds
Now, its easier to get short term loans. Time is not a luxury in these current times as everyone wants to maximize their day. Thus, they do not want to spend long hours or go through a long process to access a service.
With short term loan applications, you just provide the basic information on a reliable source of income and you’re on your way to getting the funds. Without a verifiable proof of a good source of income, lenders are likely to decline giving out any loans.
2. You Qualify For It Easily
When you apply for short term loans, it is relatively easier to qualify for it. There are no long bottlenecks or long-winded processes. Lenders have made it easier to access short term loans.
With businesses seeking short term loans for instance, how long you have been in business and the amount of revenue you generate is checked.
For individuals, your paycheck is reviewed to know how much income you receive. In addition to that, where you reside, the name of your employer and your social security number is also required, your current account should have been active in the last 90 days.
All this information enables the lenders to know you and to know whether you will be able to pay the loan back. When you qualify, the money will be deposited into your checking account.
3. Lower Cost Of Capital
Short term loans have a lower cost of capital. The cost of capital is the dollar amount charged by a lender for a sum of money borrowed. Short term loans accumulate interests for a shorter period.
Hence, there is a low total interest on the loan amount. The cost of capital is generally lower than when compared to the longer terms of funding.
Disadvantages Of Short Term Loan
• High Interest Rates
High-interest rates, sometimes scare borrowers away from accessing financial help. With short term loans, the interest rate is determined by the principal amount borrowed, how long the loan is for and if the collateral was used in applying for the loan.
The more you borrow, the more interest you have to pay. It is therefore often advised to only borrow what you can pay for.
The interest rate that it will cost on paying a six – month loan won’t cost as much as has to be paid on a five or ten-year loan. Having a high-interest rate when you have to repay in a shorter duration is acceptable.
• Individuals And Business That Experience Sporadic Revenue Will Not Be Able To Keep Up With Payments.
Short term loans, like any other loan, involves monthly amounts that have to be committed to repaying the loan. In the event that the individual faces challenges on getting money monthly to pay, the loan repayment will face a delay.
Having credit available to you comes with its benefits and shortfalls. Short term loans can come in as an alternative after you have exhausted all your options.
You should use short term loans when you’re short of cash for a needed emergency. You can have the money you need in a very short time.
If used well, short term loans can be a tool for regaining control of your finance. This is because the maturity date for the loan is fixed and anyone who patronizes it can plan their way around paying back. Apply for a short-term loan from After loans canada now.
It takes as much effort to pay for the short term loan as the long term ones. The truth is, missing the loan payments on short term loans can impact negatively on your credit score. Its necessary to pay the loans in full and on time.
It is very important to demonstrate responsibility when it comes to loan repayment. The main factor is in how the funds are put to use and the time its repaid.
Disclaimer: All loans offered through this website are subject to credit and underwriting approval. AfterLoans.ca is a lead referral company, not a lender. AfterLoans only works with financial service providers that adhere to Canadian laws and regulations. Our lenders lend from $500-$5,000. Loans amortization is between 6-36 months. APRs range from 19.99% to 55%. The actual APR charged will depend on the lender’s assessment of your credit profile. For example, on a $1000 loan borrowed for 12 months at 29.9%, the monthly payment will be $97.24; with a total repayment, including interest, of $1166.88 There is also lender’s optional loan protection policy. In the event of a missed payment an insufficient funds fee of around 45$ may be charged (dependent on the lender). If you default on your loan payment plan the lender may terminate the plan and the remaining balance will become payable immediately. Our lenders employ fair debt collection practices, but will pursue the payment of Outstanding debts to the full extent that Canadian law allows.