Whether you need a quick cash infusion or to solve a cashflow issue, a short term personal loan can come in handy.
There are a variety of things that you can use a short term personal loan for.
Whether you need to cover an unexpected expense, consolidate debt, or make a large purchase, a short term personal loan can be a helpful way to get the funds you need.
With competitive rates and flexible repayment terms, a short term loan can be a great solution for your financial needs. In this article, we look at how you can use a short term personal loan.
What Is A Short-Term Loan?
A short-term loan is a type of loan that is typically repaid within a year.
These loans are generally used to meet unexpected financial needs or to take advantage of opportunities that require quick access to capital.
Short-term loans are unsecured, and they are approved within a short time after a review of your credit history.
Some common examples of short-term loans include payday loans, title loans, and lines of credit.
Before you apply for a short-term loan, you need to research the terms and conditions of each and choose the best.
So consider the following before you take a short-term loan:
- Short-term loans have a higher interest rate than long-term loans
- Not all lenders offer these short-term loans
- You should take a short-term loan if you are sure you can repay it
Examples of short-term loans include lines of credit, credit cards, payday loans, and short-term personal loans, among others.
What Can You Use A Short-Term Loan For?
Short-term loans can be used for a variety of purposes. Here are some of their top uses:
One of the most common short-term loans is payday loans.
You can borrow payday loans to pay hospital bills or sort out unforeseen emergencies. You must be able to pay off day loans when you receive your salary.
Improve Your Credit
If you have a poor credit rating, you are advised to take out a short-term loan to help you improve your credit rating.
Make sure you pay the loan on time to avoid further damage to your credit score.
As A Merchant Cash Advance
A merchant cash advance is given to businesses that have high credit card sales. The advance serves as a short-term loan to help improve business cashflow.
As A Bridging Loan
A bridging loan is a short-term loan that you can use while you wait to sell your property. Bridging loans allow a buyer to purchase a property before they sell the old one.
Interest Rates Of Short-Term Personal Loans
The interest rate of short-term loans depends on the lender.
Banks offer short-term loans at a rate of 3.4-5.50%. Licensed money lenders are allowed to offer short-term loans at an interest rate of not more than 4%.
Do your research and choose the best interest rate before signing up for any short-term loan. Be sure you can pay back the amount you have borrowed from the lender.
Failure to pay back short-term loans may result in punitive penalties.
Advantages And Disadvantages Of Short-Term Loans
Before you sign up for a short-term loan, review its pros and cons. Below are some of the most important pros and cons you should consider.
Benefits Of Short-Term Loans
Less Costly In The Long Run
While short-term loans may look expensive, they are cheaper in the long run. This is because you pay less interest as compared to long-term loans.
You accrue interest for a short time, and that means the cost of the loan is lower in comparison to long-term loans.
Flexible Repayment Terms
Short-term loans have flexible payment periods. This means you can choose the loan tenure.
You decide how long you want to pay the loan within the given loan tenure. If you are lucky and get a windfall, you can repay your loan with no penalties.
Short-term loans are easily accessible. You can get short-term loans from banks, licensed money lenders, and other financial institutions.
You can apply for a short-term loan in minutes through the lenders’ online portals.
Improves Your Credit Score
Short-term loans can improve your credit rating. If you pay short-term loans on time, you will eventually improve your rating.
Accepting and paying a short-term loan on time is one of the best ways to build your credit score.
Cons Of A Short-Term Loan
Most short-term loan lenders charge a processing fee, which is charged every time you take a loan.
If you take a short-term loan several times a year, you will incur high loan charges.
Late Payment Fees
If you miss a repayment, most lenders charge late payment fees and administrative fees. Lenders charge high rates for late payments. They will charge a percentage of the borrowed amount. Licensed lenders charge admin fees and a late repayment interest rate of up to 4%.
Higher Chances Of Missing Repayments
Short-term loans usually have short loan durations. If you have not prepared the cashflow, you are likely to miss the repayment, leading to penalties.
As a result, you will need to pay more, which could lead you to have more debts.
You may be forced to take more loans to pay off your current debt. This ruins your cashflow and eventually affects your credit rating.
How To Choose The Right Repayment Plan
It’s important to do your research and select the right repayment plan. Before you opt for any loan, make sure you choose the right repayment plan. Here are a few things to consider.
Consider Your Ability To Pay
The shorter the repayment plan, the more you will need to pay. You need to consider your ability to pay before you select a repayment plan. Don’t overburden yourself.
Review The Terms And Conditions Of Various Lenders
Review the terms that banks and licensed money lenders are offering and choose the one that best suits your needs.
Check the interest rate, loan tenure, late payment penalties, and other terms of the loan. Choose the loan with the repayment plan that will work for you.
How Long Should The Loan Term Be?
The loan tenure of a short term depends on the type of loan you want.
A short-term loan can have a tenure of one week, one month, or one year. The loan tenure depends on the type of loan.
Let’s look at the different types of loans and their tenures.
Such loans can be used to sort out emergencies. They are repaid at the end of the month. If your payday is a few weeks away but you need to sort out an emergency, you can opt for a payday loan.
Bridging loans help you purchase a new property while you wait to sell your old one.
The loan tenure for bridging loans is mostly six months to one year. Although bridging loans have a higher interest rate than other short-term loans, they come in handy when you have a property deal you don’t want to miss.
Emergency Cash Loans
Licensed loan lenders and banks offer emergency cash loans. The loan tenure for such a loan is mostly one month to one year.
For such loans, licensed money lenders are able to approve the loans faster than banks.
In short, the loan tenure depends on the type of loan you choose. Make sure the tenure works for you to avoid defaulting on your obligations.
Where To Get A Short-Term Loan
In Singapore, you can get short-term loans from the following institutions:
Licensed Money Lenders
One of the quickest ways to get a short-term loan is to visit a licensed money lender like U Credit. In Singapore, licensed money lenders are regulated by the Ministry of Law.
The amount you can get from a licensed money lender depends on how much you earn. Singaporeans and permanent residents earning less than $20,000 yearly can get up to $3,000, while those earning more than $20,000 a year can get up to six times their monthly salary.
Banks offer short-term loans to their customers. Compare the rates of different banks on offer and choose the best loan terms.
Private funders are only allowed to lend to accredited corporates and investors. They are not regulated by the Moneylenders Act.
Choose A Short Term Personal Loan Wisely
Short-term loans are easily accessible, as you can receive the cash quickly to sort out unforeseen circumstances.
But before you take the loan, make sure you research for the best offer and ensure you can repay the money you have borrowed.
Get the best short-term loan offer from U Credit.