Facts You Need to Know About Short-Term Loans

By Angela Monroe - March 6, 2020

There are lots of reasons why you might be considering a short term loan but if you have bad credit short term loan facts are essential to have up your sleeve when it comes to making a decision.

Always consider a short term loan carefully. For some people, they can be a great financial tool to help them through a short term financial difficulty when they need quick access to funds.

You should always be sure that you don’t stretch yourself too far financially and that you’ll be able to pay back the bad credit short term loan within the loan term agreed. This will help to avoid damaging your bad credit score further.

Length of a short term loan

In terms of the loan term, short terms loans are generally thought of as any loan that lasts from as little as two weeks to as much as one year. Many borrowers of short term loans are required to pay back the loan within 90 days – this is a common loan term for short term loans.

Due to the higher interest rates on short term loans, you’ll probably want to avoid taking out a bad credit short term loan for longer than a few months. You should also consider how you receive your income (this could be monthly or every fortnight) so that you can give the lender an accurate indication of how regularly you can make your loan repayments.

Reasons for a short term loan

There are lots of reasons why you might take a bad credit short term loan. Generally, these loans are used by people who only need to borrow money for a short amount of time as they feel they’ll be able to pay it back (possibly with a paycheck being due shortly) within a short amount of time.

You might need a short term loan to cover an expense that you hadn’t previously expected. This could be anything from emergency medical expenses to essential maintenance work required for your car or home.

Credit checks with short term loans

Many short term loans are favoured by people with a bad credit score as they often don’t require credit checks in order to be approved. This can make them a quick and easy option for getting the funds that you need.

It’s important that you don’t get drawn in by a bad credit short term loan that looks too good to be true though – as it probably is! Make sure you find a trusted lender who will give you fair terms and can offer advice and accurate bad credit short term loan facts.

Getting a short term loan

Part of the appeal to a short term loan is that they’re often very quick and easy to get hold of. There are lots of online companies that offer you approval on a short term loan within a matter of hours. Take your time though and find the right lender for you especially if you already have bad credit.

To get a short term loan, you’ll usually have to fill out an application form which is often online. You’ll then get the result of the pre-assessment and can often get full approval within a few hours. Unlike banks or other big lenders, many online lenders offering bad credit short term loans will simply require basic personal information as well as some key financial details from you.

Loan amounts with a short term loan

The amount that you can borrow with a short term loan will depend on a number of factors. Although you may be tempted to borrow as much as possible, try and act rationally and think carefully about your financial situation.

If you borrow more than you can afford to pay back you’ll find yourself in financial difficulty and could damage your bad credit score further. You’ll need to also account for the interest rate you’ll pay in addition to the original loan amount. Borrowing within your means will save you stress and financial issues long term.

Fees to consider with a short term loan

Due to the quick and easy access that comes with short term loans, there are often relatively high fees associated with them – especially if you’re taking out a bad credit short term loan.

You’ll need to be aware of the interest rate which comes with the short term loan and factor this in with your monthly repayments. There could also be additional fees including a penalty for paying back the full amount before the end of the loan term. Speak to a trusted lender to ensure that you don’t end up paying hidden fees or extortionate interest rates with your bad credit short term loan.

Advantages of a short term loan

The main advantage of a short term loan is that it’s convenient. It will provide you with the funds that you need when you need them.

You won’t be required to show lots of documentation and if you have bad credit, this often won’t be an obstacle in getting approval for a short term loan.

With a short term loan you won’t be expected to detail how the money will be spent – this is different to other loans such as a car loan or a business loan which often require specific details about where the money will be going.

Short term loans don’t require collateral which means that if you don’t pay them back, you won’t have to worry about your assets being reclaimed.

The right lender for a short term loan

Finding the right lender is essential when you’re considering a short term loan. For bad credit short term loans it’s even more important to make sure that you are working with a trusted lender who can help direct you to the best option for you.

Take the time to research lenders carefully and read online reviews or get word of mouth recommendations from other people who have bad credit. Check the loan process that they offer works for you, and always know exactly what you can pay back so that the lender can work with you as efficiently as possible.

Angela Monroe
Angela Monroe is the Community Manager at The Positive Group, specialising in giving people the information that they need when they need it, and putting you on the path to a fair financial future. She has 8 years of experience in helping Australians find the right finance solutions, and regularly contributes articles to empower Australians with the knowledge they need to become financially healthy.

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