Short-term loans are an increasingly popular credit product . At first they had a bad reputation, because they were considered usurious products. However, after the 2008 crisis, credit practice was cleaned up and today they are as respectable a product as any other. Do you want to know if these loans interest you?
How short-term loans work
The short-term loan works like any other credit:
1. The borrower consults the offer of credit products and requests a loan from the lender that offers the best conditions.
2. Once the contract is formalized, the borrower will have to comply with the repayment schedule, paying the agreed installments on time. In addition, if it is a company or self-employed person, you must compute the loan as a liability in your accounting.
3. If the borrower is late in payment, he will have to pay late interest . If, on the contrary, you want to anticipate the expiration, it is likely that you will have to pay a penalty for such anticipation.
4. Once the entire loan is paid, it is canceled. If it is not paid, it can be claimed in court and will continue to accrue interest.
The only peculiarity of a short-term loan is that, by definition, you must repay it within a maximum period of one year . Although many entities grant weekly or monthly loans.
What are the advantages and disadvantages of this type of loan
The main advantage of a short-term loan is that, as it is usually small, you can request it quickly and without much paperwork . Also, if everything goes smoothly, you can cancel it in a matter of weeks.
This allows you to get an injection of liquidity when you need it most . For example, to deal with unforeseen expenses such as machinery breakdown, a penalty or cash out of balance.
As a disadvantage, it can be said that the promptness of payment; since the maximum return time is usually one year. On the other hand, the amount of financing of short-term loans are of low amounts. Therefore, it cannot be used for large projects, but for specific cases.
Is it profitable to apply for short-term loans?
Short-term loans are profitable, because they serve to solve the lack of liquidity. In addition, since they are low in amounts, their approval is easier and faster. This type of loan is one of the most requested today in the online loan market.
For example, if thanks to a short-term loan you can pay a late installment of another loan with higher default interest, the operation will pay off. Or if thanks to these loans you can take advantage of an offer on a purchase and save more money than your credit costs, you will be making money.
In short, short-term loans are interesting credit products like any other , with their advantages and disadvantages. Before applying for financing you always have to be informed. The best way to do this is to consult a comparator such as Ideal Loans , in which you can evaluate different loan options.