A short term loan is financing to someone in need of it but it is attached with a quick repayment schedule. This type of loan is usually offered for a short period of time which is as short as ninety days. These short term loans posses maturity dates that are significantly short than the regular loans. Short term loans repayment schedule goes from ninety days to fifteen years unlike the long term which can even go up to thirty years. They can also be repaid immediately a borrower achieves his initiative.
Eligibility for short term loans are always dependent on the credit history and score. Payday loans with no credit check do not exist, lenders will always perform a credit check to ensure that they are lending responsibly.
A short term loan carries some advantages over the long term loans. They are always offered to individuals that are in need of quick financing. Its primary benefit is that it is immediately delivered thus enables the borrower to operate with increased liquidity. Its brief repayment schedules do not require serious commitment thus the borrower is not indebted to the lender for a significant period of time.
With its benefits, there exist the shortcomings too. Some of the shortcomings are that short term loans do provide less money with higher interest rates. Before they are granted, a lender has to review the company’s cash flow history and repayment track record. In short, they are unsecured as compared to the long term loans. They do not contain collateral as the bank relies on the credit history and score of the borrower. Another disadvantage with short term loans is that it has higher penalties if a default is realised.
All in all the advantages and disadvantages are equal in that there is no collateral in both. This is an advantage to the borrower but a disadvantage to the respective bank offering it. Before seeking for a short term loan, the best advice is to check on the conditions of the bank that it is offering it. Lack of proper knowledge can make one pay higher penalties for default.