There are many stages among the entire short term loan process. Once you have decided on what you require from the loan the next decision is what type of short term loan you should seek. There are typically five major types of short term loans available that offer various options in order to meet most people’s needs.
Below are the five different loan options available and some guidance in regards to each of these in order to assist you in making an educated decision.
- Cash Advance & Pay Day Loans
A cash advance or payday loan is the quickest option for a short term loan. Typically, they are small amounts of money, under $1000, that are repaid within days or weeks. The repayment is usually directly debited from your account on your next payday. Due to the small loan amounts and repayment period, the assessment focuses on your employment and pay cycle which make it easier for those with bad credit histories to secure funds. Even though this type of loan is very enticing, not paying it back will quickly put a black mark on your credit file so it is important to only borrow what you can pay back.
- Short Term Unsecured Personal Loans
Usually, major banks lend between $5,000 and $50,000 with a loan term up to 7 years for unsecured personal loans. A personal loan can be used for car loans, wedding, holiday, furniture or other household items. When you are in repayment of these loans, pay attention to the frequency of your repayments – you could decrease your loan term by increasing your frequency to fortnightly rather than monthly.
- Short Term Bank Overdrafts
If you have a good credit rating and a long standing relationship with your bank, often times they will approve a short term loan in the form of a bank overdraft. You may be given approval to overdraw your account for a pre-approved amount and agreed repayment period.
- Short Term Secured Loans
Short term secured loans can be caveat loans, second mortgages or bridging finance which cover shortfalls in a variety of scenarios. The most common situation occurs when a property is pending settlement, for business reasons or for investment purposes and is secured against real estate property. Lenders will ask for an exit strategy which refers to how and when you will repay the loan.
- Secured Personal Loan using Motor Vehicles
It is possible to secure your loan against a vehicle if you need up to $10,000 and the motor vehicle is in good condition, is paid off and is worth equivalent of the loan amount. This option is suitable for those that do not own or aren’t paying off a mortgage but want the advantages of a secured loan.
Each type of short term loan has its advantages and drawbacks. Before making a decision it is important to consider your goals and seek advice if required.