There are times when a short-term loan is a better fit than a more traditional product offering, such as a personal loan or home equity line of credit.
Before you settle on a short-term loan, it’s critical to understand the terms and conditions, as well as the advantages over your other options.
As the name suggests, a short-term loan is one that you pay back over a short period of time, typically 12 months or less. When compared to a personal loan, with terms as long as 84 months, you can see just how much shorter it is.
Here are five key benefits of obtaining a short-term loan:
1. Pay Less Interest
Since you have less time to repay a short-term loan, you can expect a lower interest rate. When you combine this with the fact that you’ll repay the money over the course of several months, not years, you’re in position to save quite a bit on interest.
2. Easier to Manage
The problem with a long-term loan is that you don’t know how your situation will change in the future. For example, you may be able to comfortably make your monthly payment right now, but there’s no guarantee things will stay this way forever.
It’s easier to manage a short-term loan because it’s easier to see the finish line. You don’t have to worry as much about your financial circumstances changing.
3. It’s Fast
Since a short-term loan takes less time to process, you can get your hands on the cash you need within a matter of days (at the most).
Most lenders, especially those that do business primarily online, strive to provide you with a decision within one to two business days. If you decide to proceed, you may be able to secure the funds the same day (or next business day).
4. No Collateral Necessary
For many consumers, the biggest drawback of a loan is the collateral. In short, this is something you “put up” in exchange for the funds. For instance, with a home equity loan, your house is the collateral.
If you repay your loan as required, your collateral never comes into play. However, if you default for any reason, the lender has the legal power to repossess the property.
A short-term loan has no collateral attached to it. As long as your credit score is strong, you’re in position to receive an approval.
5. Increase Your Credit Score
This may not be the top benefit of taking out a short-term loan, but it’s nice to know you can take advantage without doing anything.
As long as you pay off your loan on time and in full, you can be rest assured that it’ll have a positive impact on your credit score.
With so many benefits, it may be time to compare lenders on your search for the perfect short-term loan.
As long as you have good or excellent credit, you’re in position to receive an immediate approval and secure the funds in no time at all.