Like many other terms related to financing, short-term loan is frequently misunderstood and used in the wrong sense. To banks, short-term loan is an umbrella term for a steady stream of loans given to a business or an individual for one year or less. Figuring out the inner workings of a short-term loan is vital because of different rates and different cash flow. Let’s go over the most common types of short-term loans:
#1. Payday loans.
It’s the most common type of short-term loans. If you need some money (not a huge amount) on short notice, you go for a payday loan. This type of a loan is usually paid back in full (+ interest) in 30-35 days.
Applying for this type of a loan is simple, for example, you can apply for Louisiana payday loans online, via a website – all you need to specify is your age, various details related to your bank account/debit card, information on the income/expenses (optional). Once you’ve done that, you get an instant decision with “yes” being the more common one because payday loans are not considered risky.
#2. Short-term loan.
It’s similar to the one above, but it’s not the same. It’s paid back over an extended period of type. The applying process, however, is exactly the same with some minor changes depending on the lender in question.
Many people prefer short-term loans because monthly payments are lower than a single payment meant to pay off a payday loan in full.
#3. Line of credit (LOC).
LOC is fairly similar to an overdraft. You should use it for emergencies only because it’s not a very good idea to rely on overdraft for day-to-day spending. Usually, when you apply for LOC, you’re given a very strict limit. You can spend up to the limit but not more.
#4. Logbook loan.
This one is specific to the UK, but its variations are common across the globe. The gist of a logbook loan is simple – lender gets to possess the borrower’s care/van/motorcycle/any other vehicle if the loan is not paid off in full. You can apply to borrow up to seventy percent of your vehicle’s value.