What to know before applying for a short-term loan — Modern Mississauga Media

Very approachable

Short-term loans are among the most accessible loans right now. For people with urgent financial needs, you can borrow a short-term loan even if your credit rating is low. Simply having a regular job can qualify you for this loan. Some options also do not require borrowers to post collateral against the loan to qualify.

Additionally, many lenders allow online applications for short-term loans. This is an advantage for borrowers because they won’t have to worry about going to the lender’s office. With online loans, you can also submit your application within minutes and be notified immediately if you qualify for the loan.

Good option to build your credit score

There are borrowers whose goal is to build credit. Getting a short-term loan is a great option for this purpose. Since you can pay off this type of loan in a short time, it’s an easy stepping stone to building your credit as long as you repay the loan by its due date.

Types of short-term loans

You can choose from several types of short-term loans offered by lenders today. Here is an overview of the different types of short-term loans.

Payday loans

Payday loans are perhaps the best-known short-term loan option. If you borrow this loan, you must make a repayment before your next payday, usually in two weeks to a month.

You can use a payday loan for your urgent expenses, such as paying for groceries or utility bills. But watch out for high interest rates on payday loans, as they can throw you into a cycle of debt.

Lines of credit

Lines of credit have a repayment term of a few months to a year. This type of short-term loan allows individuals and businesses to access a line of credit. The amount borrowed from the line of credit must be paid in monthly installments within the set repayment period.

Invoice financing

For business owners who need financing for their business activities, invoice financing is a good option. This allows business owners to use their accounts receivable to obtain loans from lenders.

The lender will assess the amount owed on the invoices your business has issued to customers before the lender provides you with the money you need to borrow. You are likely to be approved if you have a considerable amount of accounts receivable. The lender will collect your refund when your customers have paid the bills.

Cecil N. Messick