The small short-term loans are typically due within a year’s time or less. In fact, these loans are way smaller in size in comparison to the otherwise long-term loans. And in most cases, they are used to meet temporary or immediate financial requirements.
Short-term loans can either be secured or unsecured and is undoubtedly a great option for financial assistance for a brief time. However, these loans come with significantly higher interest rates and fees than long-term loans. So before you can take out a short-term loan, make sure you consider the terms very carefully.
Today, this article will give you valuable insights into the types and characteristics of short-term loans. Please keep reading until the end to learn more about it.
Types of Small Short-Term Loans
There might be times when you require immediate financial assistance for a brief period of time. And only small short-term loans can provide you with aid during such situations. Some of the most common options for this loan are:
- Cash Advances
You can avail of these short-term loans through credit card companies. Please note that these loans are quite easy to qualify for in comparison to traditional loans. However, they come with considerably higher fees and interest rates.
- Payday Loans
These short-term loans are typically due on the next payday of the borrower. And even if they are easier to qualify for, they often have significantly higher fees and interest rates.
- Pawn Loans
Pawn loans are typically short-term loans that you can acquire from a pawn shop. So if you have valuable items which you can pawn, you can acquire a short-term loan in return. This loan is deliberately secured by the item which you pawn and must be paid back within the stipulated period. Only then will you be able to get back your pawn item.
- Personal Loans
These typically unsecured loans can serve a plethora of purposes. While personal loans come with short repayment terms, it is an excellent option for short-term financial needs.
- Line of Credit
It is nothing but a flexible short-term loan option that enables you to borrow up to a certain limit. While you can borrow and repay funds as required, your interest rates will be calculated on the credits used.
Characteristics of Small Short-Term Loans
Some of the most prominent characteristics of small short-term loans are:
- It offers a typically smaller loan amount
- It comes with a significantly shorter repayment period
- It might require collateral
- It comes with higher interest rates
- It has a quick approval process
- Might or might not have additional fees
So if you ever consider a small short-term loan, please ensure that you repay the loan within the stipulated time. Only then will you be able to avoid any additional fees or negative effects on your credit score.