What is a short term loan?
Short term loans are offered by different lenders, ranging from trusted payday loan lenders to even colleges. Short term loans are due within a set amount of time, usually less than a year, depending on the lending institution you used to receive the loan.
Some colleges offer short term loans to students. The borrower must be a student and must be able to show that the loan can be repaid in a certain amount of time. If a student is expected to receive student loans or other student aid, the college may lend a higher amount.
Short term loans are offered by brick and mortar stores around cities or via the internet. These are unsecured, high interest loans that are usually due with the deposit of the borrower’s next paycheck. For example, a payday advance company may offer a loan and charge $30 for each $100 borrowed.
Banks also offer short term loans. These loans can have a maturity date as early as 60 to 120 days from the date of inception of the loan. Bank short term loans can also mature up to one to three years after the inception of the loan. The terms depend on the bank and the amount of money borrowed.
Many banks may also require collateral, depending again, on the amount borrowed. The smaller the loan, the less likely the lender or bank is to ask for collateral. The application process is also a bit longer because the bank will check the borrower’s credit to be sure the borrower has the ability to pay the loan back. They may also look at a borrower’s personal credit score to determine whether to grant a short term loan. Banks may offer short term loans for a lower annual percentage rate than a payday loan service.
If you read the cautionary literature handed out by nonprofit debt management agencies and by consumer advocacy groups, short term loans in any form may seem terrifying. However, they can provide a lifeline for you if extraordinary circumstances put you in the position of needing cash fast.