Short-term loans are an increasingly popular credit product. At first they had a bad reputation, because they were considered usury products. However, after the 2008 crisis, credit practice was reorganized and today they are a product as respectable as any other. Do you want to know if you are interested in these loans?
How short-term loans work?
The short term loan works like any other loan:
1. The borrower consults the offer of credit products and requests a loan from the lender that offers the best conditions.
2. Formalized the contract, the borrower will have to comply with the repayment schedule, promptly paying the agreed installments. In addition, if it is a company or self-employed person, you must compute the loan as a liability in your accounting.
3. If the borrower is late in the payment he will have to pay default interest. If, on the contrary, you want to anticipate the expiration, you will probably have to pay a penalty for such anticipation.
4. Paid the entire loan, this is canceled. In case of non-payment, it may be claimed judicially and will continue to accrue interest.
The only particularity of a short-term loan is that, by definition, you must repay it within a maximum period of one year. Although many entities grant weekly or monthly loans.
What are the advantages and disadvantages of this type of loans?
The main advantage of a short-term loan is that, as is usually a small amount, you can apply quickly and without much paperwork. In addition, if everything goes on wheels you can cancel it in a matter of weeks.
This allows you to get a liquidity injection when you need it most. For example, to deal with unforeseen expenses such as machinery breakage, a penalty or a cash flow.
As a disadvantage, it can be said that prompt payment; since the maximum return time is usually one year. On the other hand, the amount of financing for short-term loans is of low amounts. Therefore, it cannot be used for large projects, but for specific cases.
Is it profitable to apply for short-term loans?
Short-term loans are profitable, because they serve to solve the lack of liquidity. In addition, for being of low amounts, approval is easier and faster. This type of loan is one of the most requested today in the online loan market.
For example, if, thanks to a short-term loan, you can pay a late installment of another loan with higher default interest, the operation will be taken into account. Or if thanks to these loans you can take advantage of an offer on a purchase and save more money than your credit costs you will be earning money.
In short, short-term loans are interesting credit products like any other, with their advantages and disadvantages. Before requesting financing you must always be informed. The best way to do this is to consult a comparator such as Ideal Loans, in which you can evaluate different loan options.