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What’s a short-term loan?
A short-term loan is an example of the kind of debt that needs to be repaid in a hurry. There is a possible range here of 12 months all the way up to 36 months, although the minimum loan maturities may be considerably shorter depending on the lender.
In general, the longer the length of the loan, the greater the total amount of money you will be required to pay back. Loans with shorter maturities tend to have interest rates that are lower, whereas loans with longer terms tend to have interest rates that are higher. However, the monthly payments for short-term loans will be significantly greater than those for longer-term loans.
How to look at short-term loans
When conducting research for a short-term loan, there are a few factors that you should keep in mind while comparing the various loan offers from different lenders.
- Loan conditions: If you are looking for quick lenders, you should pay close attention to the terms of the loan, including how you will pay it back. First, decide how quickly you want to pay off the loan. Then, do some research to find a lender with repayment terms that work with your schedule. The total amount paid back on loan will be the least if it is paid back in the shortest amount of time.
- APR: The annual percentage rate (APR) that a lender tells you may affect how much you have to pay back for the loan in total. The better your credit score, the more likely it is that a lender will give you the lowest APR they have to offer.
- Eligibility Requirements: Before filling out an application for a loan, it’s important to ask the lender what the requirements are. Most lenders will want you to have a certain minimum annual income and keep your credit score within certain limits. Some have extra requirements that depend on the borrower’s income-to-debt ratio as well as the reason for the loan.
- Costs and penalties: A large number of lenders will charge borrowers an origination fee, the amount of which will be subtracted from the total amount of the loan. Additional charges include things like prepayment penalties, administrative expenditures, and late fees, so keep an eye out for those. However, there are certain lenders who do not impose any fees at all; therefore, it is important to thoroughly investigate the terms of any loan offer.
- Time till funding: Depending on the lender, it may take a certain amount of time before the loan money is put into your account. If you are in a hurry to get your loan, you should pay close attention to how long the lender says it will take for approval and how long it will take before you actually get the money.
How to get a short-term loan even if your credit is bad
If you have a low credit score, getting approved for a loan could be challenging for you. Be aware that even while some creditors are still willing to extend credit to borrowers with poor credit, the terms of the loan they provide might not be ideal for you.
Consider implementing one or more of the following credit-improving tactics if you’re having problems improving your score:
- Be prompt in making payments for your bills. Your history of making payments is 35 percent of your credit score; hence, late or skipped payments can have a major impact on your score. To keep your credit rating in excellent standing, make sure you pay all of your payments on time.
- Pay down the debt you already have. Your utilization rate accounts for thirty percent of your credit score, and lending institutions may view it unfavorably if it accounts for more than thirty percent of the total credit you have available to you. If your credit card has a maximum of $3,000, for example, you should try to use no more than $900 in total each month to keep your credit utilization rate as low as possible. This will allow you to maintain a good credit score.
- Examine the details of your credit report. Your credit score could go up a lot if you look over your credit history and find mistakes. This is especially true if you find mistakes in your credit report. You have the right to file a dispute with the credit bureau(s) that are responsible for the information in your report if you think it is wrong or if you suspect fraud.
How do I apply for a short-term loan?
You can get a short-term loan by filling out an application with a financial institution such as a bank or credit union, or with an online lender. You will need to satisfy the standards that are specific to the lending institution in question, which could include a minimum acceptable level of income or credit score. After submitting your application, you could be asked to confirm your facts with the lender and provide your agreement for a thorough credit check.
Do short-term loans help build credit?
It is possible for you to build your credit score through short-term loans provided that your lender discloses your payments to the credit agencies. You need to undertake research on the potential lenders in order to determine whether or not they report to the credit bureaus and, if so, which bureau(s) they report to (if they report at all).
How long does a personal loan usually last?
Personal loans with short repayment periods are determined, in part, by the type of lender and loan that the borrower chooses. For example, payday loans often only run for a few weeks, while loans from more traditional lenders could have terms that continue for several months.
