Essential Guide to Short-Term Loans: What You Need to Know

Short-term loans are your best option when you need cash for your business or personal use. Quick cash loans can be obtained instantly and repaid in a short time. While these loans are convenient for managing immediate cash requirements, they also have risks and insecurities. Let us know in detail about short-term loans, their types, advantages, and disadvantages.

What are Short-Term Loans?

As apt to the name, short-term loans are taken for shorter periods. These loans are offered on an urgent basis and can help resolve immediate cash shortages. Banks and other lenders offer short-term loans with varying terms and conditions.

Why Consider Short-Term Loans?

When you understand short-term loans, knowing why to consider short-term loans will be helpful. Here are some reasons why:

• In Case of Emergency: Short-term loans are very helpful when you need money in emergencies and are short on it.

• To Get Rid of High-Interest Loans: If you have taken any other loan on which you are paying high interest, short-term loans can be used to get rid of such types of high-interest loans.

• For Shopping: Shopping loans are also short-term loans which can be used to make major purchases.

• For Travelling: You can also use short-term loans to plan your payments for travel-related expenses like booking tickets, stays, etc.

• For Education: Short-term loans are an excellent option for paying for education expenses like college fees, books, and other essential things.

What are the Types of Short-Term Loans Available?

Once we have understood these quick cash loans, the next question is, what are the types of short-term loans available? Short-term loans are of different types. Given below are some of the short-term loans:

• Payday Loans: Payday loans are taken when you are short on cash and waiting for your salary. They work like an advance salary, which you can spend on your requirements. You need to repay the loan on or before your salary day.

• Personal Loan: Offered based on your income, job, and credit history, personal loans do not require paperwork and are approved and disbursed quickly. This type of loan can be used for various purposes like urgent home repairs, medical emergencies, wedding expenses, travelling, shopping, etc.

• Loan Against Gold: As the name suggests, this type of loan is taken by mortgaging your gold against the loan amount. Also known as a gold loan, this is a secured loan that gives you the flexibility of paying back the principal amount after the tenure is over.

What are the Pros and Cons of Short-Term Loans?

Although short-term loans are essential financial tools, they also have some pros and cons. Let us find out what are the pros and cons of short-term loans:

Pros:

• Quick Cash When Needed: Short-term loans can fulfil your immediate cash requirements as these are approved immediately.

• Flexibility of Repayment: These loans offer flexibility in repayment. You can choose to pay back quickly or over an extended period.

• No Mortgage Required: Short-term loans are unsecured loans, which means you do not need to keep any collateral against the loan amount.

• Helps Build Credit Score: These loans are approved quickly and can be repaid quickly, helping you improve your credit score.

Cons:

• High-Interest Rates: As these are unsecured loans, the interest rates charged on them can be higher than those charged on traditional loans.

• Processing Fees: The lender may charge additional fees for processing loan applications that may be taken from the borrower.

• Limited Amount Sanctioned: The loan amount can be limited as these are unsecured loans, and lenders do not take the risk of providing bigger loans.

• Risk of Increasing Debt: If you are unable to pay back the loan, it may lead to an increase in debt as the interest rate on these loans is higher than that on traditional loans.

Conclusion

Instant short-term loans are an important financial instrument which can help you when you need urgent cash. These loans are easy to apply for and get quickly processed. They can help you fulfil emergency requirements or other casual expenses. For those looking to apply for a loan for low salary, mPokket is the best app, which provides quick cash loans. You only need a little documentation, and no collateral is required.