When it comes to loans, there are a lot of different reasons as well as types of loans. Whether it is for personal or business needs, a loan can help assist in attaining financial capital that might be time sensitive or hard to come by. Loans are important for many people and can be the difference between hardship and financial resolution.
When it comes to types of loans, there are definitely plenty that are considered short-term. These short-term loans are as the name suggests and are useful for a variety of reasons. Here are some of the types of short-term loans that are available and what they do.
You probably have heard of this term, and it is one of the more common types of short term loans. Payday loans are intended as a means of expediting payment for the borrower in the event they need money quickly when they are not due to receive a regular paycheck. The benefit to these is that it is quick and can be easy, as payday loans with no credit check are available to allow the money to be accessed quicker, but the repayment on the loan must be made in full at the next payday period. No credit check can help in a pinch when money is tight and this is the purpose for this type of short term loan.
For small businesses, an invoice financing loan is a good way to help recoup any money on outstanding invoices. Accounts receivable will use this loan when those outstanding invoices have not been paid and the business needs the money, which is adjusted by the lender. The loan itself has an interest rate based on how long, in weeks, that these invoices might be left unpaid. Another short term loan that is defined by an interest rate that is based on the short amount of time that the borrower needs it. This is common for personal and business short term loans.
Personal Installment Loans
Personal loans are becoming a quicker way to get the money needed to make a purchase that requires a larger lump sum of cash. These personal installment loans work in a way you might expect, where you have to repay said loan in smaller sums over the period of the loan agreement. This usually means in monthly terms as the amount is not going to be that significant that it would take an overly long amount of time to pay off, especially for something like a car. These are short-term loans for that fact because they are repayable under or around a one year length and are used for personal financial needs.
Line of Credit
Another type of loan that is not exactly a loan is a line of credit. This is a common way for people to use a balance that is available and repayable continuously rather than a single use loan that is repaid from a lump sum, like the installment loans. Lines of credit help you take money out of a balance on credit that you can use for whatever purpose, usually personal purchases like mortgages or other decently sized payment sizes, and you pay the credit back on interest based on the amount of credit that was used and at a monthly repayment amount. Lines of credit allow for a much higher credit balance than something like a credit limit on a business or personal credit card.
Debt Consolidation Loans
Combining existing loans into one easier to manage loan is a short-term loan type that helps alleviate the stress of having to repay multiple loans. Short-term versions of debt consolidation loans come in forms that deal with common repayments like car payments or credit card debt. These types of loans can be paid off on a lower APR (annual percentage rate) to help prevent a large amount of interest accumulation and, of course, keep the monthly payment on outstanding loans/debts into easy to manage monthly payments. These are useful in the short-term to help eliminate looming financial struggles related to repayment of debt.
Short-term loans come in many different forms and can help different people or businesses. They offer a lot of value for what they are worth and are intended to be used for varying levels of repayment options, interest rates, and cash sums, but they all offer the ability to access capital or credit where it would have been unavailable immediately. Whether it is a line of credit or a payday loan, these short-term lending options can be what you need if cash is needed quickly and repayment can be done shortly.