Deciding which provider from which to take out a loan can be one of the most daunting decisions you’ll make, whether it’s for your personal life or business affairs. The question you’re asking yourself is whether you should get your loan from a bank, private lender, short term online broker, or a pawn shop?
What Are Short Term Loans
First of all, what is really a short term loan? A short term loan is when you receive a set amount of cash upfront that you agree to pay back over a set period of time, with interest. Short term loans are different to traditional term loans in that they are small and the repayment period is shorter. You often pay the lender back daily rather than monthly.
The appeal of spending what you don’t have rises as short term loans are becoming ever more attractive. However, in the effort to reduce immediate funding and lock in low rates, there is more short term debt for governments. Short term loans are readily available and hard to resist especially when you have no other means of capital. You may find yourself halfway through the month desperately in need of a little financial reprieve whether it’s for your business costs or a sudden medical emergency. As with anything, there are both advantages and disadvantages to loans. As short term loans are relatively easy to get, the interest rates are higher.
Weigh Your Options Carefully
It is absolutely vital that you consider all of your options before you take out a short term loan and pick the organisation that will best suit your financial needs. Make sure you only lend as much as you can afford to pay back as failure to pay on time will result in extra fees and a bad credit record.
Questions you should ask yourself are;
-Can I change the payment schedule as I go along?
-Do they charge fees upfront or late fees?
-Are the interest rates fixed or can I gradually lower them?
-Can I pay in instalments or do I have to pay one lump sum?
Once you have answered these questions, you can determine whether you should go with a bank, private lender, short term online broker, or pawn shop for a loan. Each loan has different interest rates and differs in terms of how much money you can loan and how quickly it needs to be paid back. Your options are as follows;
They have good interest rates and the approval process is fast if you have a good credit record. However, they have shorter repayment periods and often include balloon payments. It can also be difficult to get the loan approved if you have a less than desirable credit record. Be prepared to give up your personal and business financials, as well as a detailed plan for what you intend to do with the money.
Private lenders are great for people who cannot qualify for bank financing. They’re especially great if you have a bad credit record or are trying to finance a start-up. These loans are available almost immediately online. However, interest rates are higher than the bank rates.
An online broker organises short term loans between providers and applicants. They’re available around the clock and a loan can be organised instantly from anywhere, provided you have internet access. Online brokers are able to give you an individual rate depending on your risk profile – they realise that everyone’s needs are different. However, you will incur the cost of additional brokerage fees.
Pawn shops are a good choice if you have a bad credit record because they don’t require credit checks. Here, you have two choices. You can either leave something valuable (such as jewellery) as security for a loan or you can sell the item to the pawn broker. You are able to shop around at different pawn shops for the most competitive interest rate but they will charge a higher interest rate than the bank. You also risk losing your valuable item if you cannot pay back the loan. Keep in mind that you can often only borrow a percentage of the value of the item you’re pawning. So if your item is worth 200 pounds, you may only get 100 pounds in return.
As the need for short term loans persist, it is becoming easier and easier to get them whether you can afford to pay them back or not.