Short term loans are financial products just like car loans and home loans. A significant percentage of people think car loans to be a type of short term loan, this might be true but to some extent. If the car loan has a repayment period of one year or less than that, then it can be said to be a short term loan, however, if it has a repayment term of three or five years then that cannot be deemed as a short term loan.
Regulated and unregulated financial institutions, as well as banking and nonbanking industries, define short term loans as a type of lending with a repayment term of twelve months or less. There are different kinds of short term loans that most people are unware of. Besides the commonly known ones such as secure and unsecure short term loans, below are other kinds of short term loans that people are not aware of;
Overdraft Facilities
This is a common service mostly offered by banks. Overdrafts are directly related to checking or savings accounts. This service is commonly used by those individuals who operate with a company account or those with a substantial bank account balances.
Credit Cards
Credit cards are an essential type of short term loan. They come with varying limits. The limits set the maximum amount one could borrow. Whenever one uses such a card it is like you are borrowing money which you would pay back depending on your agreement. They are different from other kinds of short term loans as one doesn’t have to apply for the loan every time they want to buy something with the card. The process itself is an approval form of the loan as long as one doesn’t go beyond their set limit.
Payday Loans
Unlike credit cards and overdrafts, paydays are short term loans meant for people with bad credits. People with bad credit or poor credit ratings don’t qualify for overdrafts or credit cards, a person can get some credits from the bank they have an account with but their loan request will never be approved. Therefore, people with bad credit can only get short term loans from un-institutionalized lending or private lending and this is where paydays come in.
Cash advances
Cash advances from private lenders or the company one works for is another type of short term loan similar to payday loans. The difference with these loans, however, is that they are not normally paid back with interest. The repayment period is usually within a few months or even a month.
Money Market
There are those lenders who have plenty of cash to lend while there are those who run out of money to lend. A money market is a collection of sort where lenders join a network to facilitate lending. It is more of a syndicate through which funds are channeled to one body to help out lenders.
Considering the above-mentioned short term loans, perhaps the best way that one could go for a short term loan is to borrow from private lenders who don’t have high credit score criterion, ask for collaterals or guarantors, the kind that Cash Carrots facilitates.