Short term loans have become increasingly popular when a small financial boost is needed. Here on Moneezy we give you the best possible overview of online loan offers!
Short term loans are becoming increasingly popular in Canada both as a cash flow stop-gap for small businesses and as a personal loan to tide you over till the next pay check.
As you know, life happens. Unexpected events can occur that leave your finances short. Perhaps, your car broke down without notice. You need an emergency visit to the dentist, or you need small cash for a critical house repair job. Could be your small business needs a quick cash infusion to take advantage of a seasonal high-volume sales cycle. Alternatively, perhaps, you came upon an unexpected business opportunity, but you had little cash to take advantage.
Short term loans are the perfect option when you need a small amount of cash for a short time. They are also a flexible financial tool to see you through a cash crunch. Be aware that short term loans typically have high-interest rates. Since you are paying back the credit within a short time, lenders often charge a higher interest compared to other loan products on the market.
That said, financial experts recommend before you take out a short-term loan to first, plan out how much you’d need and for how long. And, also to be sure, you can repay the loan on time. Keep in mind too that short-term loans are not suitable options to finance major expenses. For instance, don’t take out a short-term loan to pay for a car loan or buy new equipment for your business or downtime payment for a new home.
Use short-term loans as a temporary financial solution to tide you over till the next pay check or your account receivables are cleared. You may want to shop around, compare rates from different lenders before committing to any product. Use online short-term loan comparison site such as moneezy.com to compare rates from different lenders for the best deals.
Short-term loans offer unique benefits that continue to make them an excellent option for quick cash to tide you over when you are in a financial squeeze.
When filling the form for a short-term loan, you may want to spend some time to read through the fine prints. Often, lenders may have hidden charges and terms tucked somewhere.
Before applying for a short-term loan, you may want to be sure that taking out the loan is the best option for your situation.
Here are things to consider to know if short term loan is right for you:
As stated earlier, applying for a short-term loan is a straightforward affair. Here are the steps to follow:
Typically, each lender has its set of rules and criteria that borrowers must meet before they can consider their applications.
However, there are general requirements that cut across all lenders. Before applying to a loan provider, check their criteria to be sure you qualify for their loan.
You can go ahead to submit your loan application once you meet these requirements. However, note that satisfying these criteria does not mean your loan application will be approved. It means your application can now be considered.
The total cost for a short-term loan is the sum of the loan amount and interest accruable to the loan.
As an illustration, let’s say you took out a short-term loan of $500 to be repaid over a period of 4 months at an annual percentage rate (APR) of 1250.4%. To learn more about APR and how it impacts the final amount you repay for the loan, please check out our article about online loans.
A breakdown of the monthly repayment plan for our example above would be:
When you add these sums together, you have $714.61 which is the total amount you will pay back on a $500 short term loan for a four months term. The interest charged is $714.61 minus $500, which gives you $214.61.
As you can see, the interest on short term loans is high. Hence, we recommend doing your due diligence to be sure you can repay the loan on time before applying.
Short term loan could come in handy when you are in a financial crunch, need a fresh infusion of cash to keep your small business open, or when you run into unexpected emergencies. However, there are situations where it is not recommended to take out a short-term loan. For example, if you just lost your job or need the loan to fund a long-term expense. In this situation, talking to an expert for the best options available to you might be the best course of action to take.
A takeaway from this article is: before applying for a short-term loan, be sure that you can comfortably pay back the loan within 30 days without having to take out another loan. Of course, you will have moments when a short-term loan is your best option to handle a financial crisis, in those periods, you may want to use comparison sites like moneezy to find the best cheapest deals available.
For the past year, more than half (55 percent) of the loans taken were for amounts of $500 or less. Three-quarters of the payday loans were taken out for the amount of $1,000 or less. Source: The Government of Canada