Short Term Loans

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Most people act as if they’re sure of what lies ahead for them, like they have some idea of what comes next. The truth is that no one actually knows, and that accidents and unpredictable emergencies do happen. Many attempt to save money for just this kind of situation, but that’s not always easy for a society that, by and large, lives paycheck to paycheck. Those who don’t save may find themselves out of options in the case of a financial emergency, but there’s one that helps many in times like these: the short term loan.

What are Short Term Loans?

They’re a type of financial process through which a debtor receives small amounts of money from a lender with a relatively quick repayment schedule. The name says it all—short term loans are a fantastic way to borrow an amount to get you through your immediate troubles. If you’re in need of money over the long term, this type of loan is obviously not what you need.

What are some types of Short Term Loans?

Short term loans are all different depending on the needs of the individual taking out the loan, but there are a few key traits that they all share. Typically, short term loans all have somewhat short repayment times, smaller principle amounts (generally between $300 and $1500), and they usually have higher interest rates on that principle than on long term loans. There are a wealth of lenders that will loan on the short term, so it shouldn’t take too much research to find the one that’s right for you.

The most common type of short term loan is what’s known as a payday loan. This type can be found at most lending institutions—anywhere from lenders based on the Web to independent check-cashing spots. The amount you’ll receive generally is based on your salary or weekly paycheck (whichever one applies to you), and the lender will often take out a credit check to observe your credit history. If your lender doesn’t implement a credit check, they may insist that you present pay stubs instead. Payday loans don’t usually include collateral because the loan itself is based on your immediate income. Usually, the repayment date on a payday loan is (not coincidentally) the date that you’ll receive your next paycheck.

Short term loans can also be taken out from banks, although this type is slightly less common. You’ll want to try this option at your own bank, or if your bank doesn’t offer this type open an account at a new bank that does. These loans vary in the length of their term—they may be as quick as a few weeks, or as long as several months. The interest rates on short term bank loans are not usually as high as those of payday loans, but they’re typically higher than the interest rates on long term borrowing.

If you’re a college student, there may be an option that’s only available to you and that suits your needs very well. Many universities lend to their students on the short term, but they’re not as typical as payday loans. The main requirement for these loans is that the borrower is a student at the lending university.

Some private businesses will give short term loans as well, but they’re usually reserved for employees at the business or affiliates of that organization. These are, again, not as common as the aforementioned types, but they do indeed happen and they may be the best option for you if your business is one that gives out loans.

Who needs a short term loan?

If you need a moderate chunk of money and fast, this may be the best option to suit your needs. They’re collateral free, so this may be an especially attractive choice if you don’t have much to offer in the way of collateral (or if you simply don’t want that kind of responsibility). If you haven’t been saving diligently, you may find yourself in need of quick cash in the case of an emergency. This type of loan is usually the best option for this type of borrower.

Something to remember is that although no collateral is involved, these are still a form of debt—they are not “free money,” and they are only a very temporary way to protect oneself instead of undergoing hardship for lack of funds. If taking out short term loans becomes a routine for you, you may find yourself already owing your most recent paycheck to your lender, which would put you back right where you started. However, if you handle it responsibly a short term loan may be your best bet, provided that you understand the risks.