My Options For a Short-term Loan
- 9th October 2018
- Posted by: Loanable
- Category: Resources
When we look at loans, there are many different types of loans, personal loans, secured loans, credit cards, even overdrafts and credit lines.
The terms for these loans, meaning how long you borrow the money for and pay it back can vary.
Loans can be for a long-term, such as 60 months (5 years), or longer, and they can be considered short-term loans, usually six (6) months or less.
There can be a few factors that determine the term or length of a loan, usually these factors are the lender’s loan policies, and also the type of loan. Some loans are naturally a long-term loan, such as a mortgage loan. These can be for up to 240 months or 20 years in some instances.
The size of a loan can also dictate how long the term is, again as a mortgage loan is such a large loan, it is a longer term to repay the loan, which helps in making the payments more affordable.
A shorter term loan can cause the payments to be higher each month.
However, there are times when you may need a loan for a short-term, maybe just a few months. The loan may be for an emergency that has come-up, or to make a purchase, and you just don’t have all the cash on hand to complete the sale.
So what are your options if you need a loan, and only for a short time period, say a few months tops?
If you are only looking for a small loan, for a very short period of time, then you could ask friends and family to see if they could lend you the money.
Borrowing from friends or family is convenient, but it also runs some risks.
Not everyone is comfortable being asked for a loan, and there can be issues should you fail to repay the loan in the agreed time and manner.
And you also need to be prepared due to the fact they may say no.
Borrow From Yourself
Borrowing from yourself means using your own credit lines such as a credit card or overdraft as a loan, and then paying the amount back under the terms you can afford, such as a monthly payment on a credit card.
Overdrafts usually need to be cleared quickly, so it can depend on how much of an overdraft you may have, and the repayment terms, as to if this is a viable short-term loan option for you.
Keep in mind if you decide to use a credit card for a cash advance, there can be additional fees involved, and also a higher interest rate.
If you are using a credit card as a way to make a large purchase and pay it off later, you need to pay more than the minimum monthly payment. Just paying the minimum monthly payment will take a long, long time to pay off the balance.
Payday loans are loans for a very short time, usually 30 days or less. These loans are to be repaid on your next payday.
The loans are easy to secure, you just need to be working, show affordability, and have a bank account, and they can be approved quickly.
You just need to insure you can pay the loan back when you next get paid.
Payday loans also carry high interest rates.
Another type of loan that can be good for a short-term or longer loan are guarantor loans. These loans can be of varying amounts and paid back over a few months, or longer up to 5 years.
Guarantor loans are also good for borrowers with bad or no credit, as credit scoring is not used to consider granting the loan. The loans are based on affordability and having a guarantor. A guarantor is someone who will make the payments on the loan should the borrower fail to pay them.
If you had thought of getting a loan from a friend or family member, asking them to be a guarantor may be easier, especially if they want to help, but don’t have the money on hand to lend to you.
Peer-to-peer loans or P2P loans are loans that can be for varying terms, but are granted by investors placing their money into a pool, to lend out to borrowers.
The terms and interest rates can vary, and P2P lender tend to accept borrowers will lower credit scores.
These loans can be for a short-term.
Many lenders will offer personal loans for short-terms such as three (3) to six (6) months.
By having the term a couple of months longer than you may feel you need the loan, you can reduce the monthly payments to help with affordability, but also remember you will be paying interest on the loan for the entire term of the loan.
Lastly as with any loan, look to see if the loan has a pre-payment or early pay-off charge or fee.
These fees are in place so a lender does not lose out on any interest or return they expect off a loan should it be paid off before the final payment date.
These fees can be a percentage of the remaining balance of the loan, or a flat fee.