Taking out a regular loan from a traditional lender such as a bank requires both borrowers as well as bank clerks to go through a large number of documents. This can sometimes take over 30 days, making these financial products only useful for those who have to finance planned expenses.
However, those who find themselves having to pay for emergencies have to resort to a different type of product, namely short-term loans. These are largely similar to regular loans with the exception that evaluating applications for them can take as little as 24 hours. Furthermore, they are offered by both traditional lenders such as banks, as well as online ones.
The fact that short term loans can be applied for through a single form and obtained in under 24 hours has made them the go-to solution for emergencies. These often include payments for pricey medical procedures, urgent car or house repairs, as well as other expenses that need to be paid in under one week.
What Are Short-Term Loans?
From a purely technical point of view, short term loans are designed to support short term needs. The capital that is borrowed from the lender must be repaid by a set due date. This term is established at the moment when the agreement is signed. The standard period for a loan is usually one year. However, lenders are free to set their own terms and conditions. Furthermore, every bank or lending platform can set the monetary limits of the loan. As a result, most lenders offer short term loans that range from £100 to a maximum of £100,000.
Smaller short-term loans are unsecured. However, larger ones require borrowers to put up some of their property as collateral. The size of the loan can also affect its term, with larger ones having to be repaid in up to one year.
What Can Short-Term Loans Be Used For?
Short term loans do not usually come with any restrictions with regards to how the money can be used, and the ones that do are designed for a very wide variety of purposes. Lenders can borrow money to pay utility bills, to purchase gadgets and household electronics, and even to make the monthly payments on other loans such as instalment loans and mortgages.
The fact that lenders can take under 24 hours to evaluate a lender’s application and to give him access to the loan makes short-term loans great for any type of emergency expense or medical procedure that needs to be paid for beforehand.
It is important to keep in mind that unrestricted short-term loans can usually be taken out directly from the lender. The ones that are offered by various online and real-world stores are only designed to finance the purchase of specific products. Furthermore, the ones offered by stores are standardised and will have similar terms and conditions, while the ones from banks may be tweaked through negotiations between the lender and the borrower.
Short-term loans can be extremely useful for individuals who need money to finance urgent expenses such as home renovation projects, the purchase of medical supplies, or the repayment of other loans. From a technical point of view, short-term loans must usually be repaid through monthly instalments that can have either fixed or variable rates.
They are offered by banks as well as at some stores. However, many short-term loans can be accessed through various types of online money lending platforms and apps.
Overall, they are easy to apply for, most do not require collateral, and the lender usually gets the money in under 48 hours, making them ideal for emergencies.