Why Opt For Short Term Loans for Untimely Financial Constraints?

Nowadays, people are so much focused on maintaining their lifestyle; they barely give any thought about maintaining financial stability. Well, if you think that making more money is enough to deal with all your problems in life, then you are wrong. Remember, when it comes to becoming financially balanced in life, it is not the money that you make counts but the money you save.

It is a clear indication that you need to watch out the money that you spend. Also, there might be various unpredictable situations in life where you would need urgent money, such as:

  • Sudden job loss
  • Medical emergency
  • Home repairs
  • Urgent travel

There could be plenty of other reasons or similar situations where you might need frequent money. But, not having funds make it difficult for the person to deal with them. In such cases, the first thing that could cross your mind either taking use of your credit card or make a personal loan. Yes, using either of them might solve your problem, but there are certain downsides that you must know.

Credit card agencies charge a substantial interest that could be around somewhere between 18%-20%. So, this means that you will have to pay a considerable amount as interest. While, in personal loans, the amount given is higher, so you could end up borrowing more than you need. All these acute financial situations can be managed with short term loans. Now, let us understand clearly about this type of funding in a more transparent way.

What Are The Short Term Loans?

Short term loans are the types of loans that are given for a shorter period to the borrower (6-36 months). So, this makes it a better option if you are looking to borrow a loan because of the temporary issue that you are facing in life.

A short term loan can be an excellent option for the individual facing any crisis or a start-up looking for funds. The amount that a person can borrow in short term loan could be anywhere around £500- £5000 depending on the convenience.

What Is The Interest Rate On Short Term Loans?

When you take a loan, you must know that the longer you will extend the term of payment, the larger will be the overall interest. But, in short term loans, the payment term is short so that everything will be done quickly. Thus, the amount that you will be paying will be significantly lower, thus ensuring that you clear the burden early.

Another good thing about taking a short term loan is that it comes with a high approval rate. As the amount that you will be borrowing will be for a shorter period, chances of getting the loan will be quite high. The lending criteria for such loans are less strict, and you can get it even if you lack a good credit score or any other.

How To Calculate Interest On Short Term Loans?

 The procedure of the interest calculation of short term loans is quite complicated. But, to make you understand, we have broken down the process of interest calculation in three components. This way, it will become easy for you to know how the interest rates are calculated. So, let us get started.

  • Step 1:- take the interest rate that you are offered and divide it by hundred to get the decimal value. After that multiply the value with the principal amount you will be borrowing along with the number of years of the loan.

  • Step 2:- Now, if the amount of loan taken is more than a year, then you will need to calculate the compound interest. For this, you will have to use the formula  P(1 + (R/100)) ^n. Where P is the principal amount, R is the rate of interest and n is the number of years.

What Are The Best Short Term Loans?

Here are the types of short term loans that you can opt for when in need of urgent financial backing:

Doorstep loan: This is the type of short term funding for which you don’t need any bank account. The lender’s agent will come to hand over the required amount in cash.

Payday loan: In this loan, the amount is disbursed quickly, even if you have a bad credit score. You will have to repay the loan within the next following month on your payday.

Quick loans: Many modern-day lenders in the market provide instant funding to the borrower. However, make sure that you find a reputed lender where you can get good deals with lower interest rates.

By far, you must have well-understood everything about short term loans; how it works, what are the types and benefits that you will get. It is imperative to know about any loan entirely before applying. It will help you to make the most of the loan.

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