Short-term loans have become an increasingly popular way for consumers in the USA to cover their expenses and stay on top of their finances. There are many different types of short term loans in the US, ranging from payday loans, to bad credit loans and even cash advance and no credit check loan options, for all types of borrowers.
As the name suggests, short-term loans enable consumers to borrow money on a short-term basis which can help them with immediate expenses. Many short term loans nowadays are based online, allowing those in need to borrow money online instantly, to help get them through financial emergencies quickly.
What Is a Short Term Loan?
A short-term loan is a form of short-time finance where consumers can borrow money with the intention of repaying it, usually within a short period of time. Short-term loans typically require repayment over 12 to 36 months, although depending on the lender and the loan type this can be even shorter.
For example, online payday loans can have a payback period of between 2 to 4 weeks, whereas installment loans may allow borrowers to repay over as long as 60 months in some states.
The length of the loan term will usually impact interest rates and also how much you will be paying back on a monthly basis; however the exact conditions of your loan will depend on the loan type, the lender and your personal financial situation.
How Can You Compare Different Short Term Loans?
When researching different short-term loans in the US to determine what is the best option for you, there are certain details to consider:
APR – The annual percentage rate (APR) can help you calculate exactly how much you will pay throughout the life of the loan. This is the rate of interest and any additional fees that you will pay back in addition to the principal loan amount. If you have a higher credit score, you are more likely to be eligible for a lower APR, making the loan that extra bit less expensive.
Loan Terms – When working with short-term lenders, you will need to look at the repayment terms carefully. Think about how quickly you will need to repay the loan and what your personal timeline is like. Before signing any agreement, you will need to be sure that you will be able to fully repay the loan plus interest on the specified date.
In general, the shorter the loan term, the less you will pay back over time. However, beware of very short-term loans as sometimes they incur some of the highest interest rates on the market. Also, if you have bad credit or even very bad credit, loans are likely to be more expensive as lenders will deem you more risky to lend to.
Lending Criteria – Different lenders will have different eligibility requirements so you should always check these before making the loan application. For example, a lender offering online payday loans in Texas, may have different criteria to a payday lender in Kentucky; they may require a minimum credit score or have minimum income requirements.
Additional Fees and Penalties – When reading about the specific terms and conditions of the loans you apply for, you should check whether there are any late fees, prepayment penalties or administrative fees that you may incur.
Time Until you Receive The Funds – If you are in a rush to receive your loan, some short-term loans may be more suitable than others. See how long lenders say it will take to be approved and how long it will take before you receive the funds. There are many lenders across the USA that can provide instant decisions and even same day funding for loans, helping you through those tough financial emergencies.
The Different Types of Short Term Loans
There are many different types of short-term loans which may be worth exploring if you are looking to take out money on a short-term basis. Always make sure to do your research and to make sure your state allows payday lending. This will help you make a better decision and avoid turning to loan sharks and other illegal lenders.
Commonly used short term loans in the USA include the likes of payday, installment, cash advance, unsecured, title loans, online loans, emergency loans, employee cash advance loans and more. There are a number of uses for payday loans and all the other types of short term loans in the US, most of which will be suitable for financial emergencies.
Payday loans are a type of short-term loan designed to cover emergency expenses that may arise between paychecks. They are known to be relatively easy to obtain and can ensure that you receive funds quickly, often on the same day. Repayment is due on the borrower’s next payday and the borrower will need to repay the loan amount, plus interest, in one lump sum.
Payday loans are notorious for having very high interest rates which can often be difficult to repay. Of all the short-term loans, payday loans have one of the shortest repayment periods; usually between 2-4 weeks. Payday loans are legalized in more than 30 states across the US including California, Florida, Texas, Tennessee and more. These loans are available either online or through payday loan stores, which are found throughout the US.
Merchant Cash Advance Loans
A merchant cash advance loan is a way of borrowing money that functions similarly to a loan. Lenders will provide the amount of money that a borrower needs to cover a payment in the immediate future. The borrower gives the lender access to their credit facility in order to make the loan payments. Every time a borrower makes a sale, a certain percentage of the proceeds will be received by the lender up until the point at which the loan is repaid fully.
Line of Credit
A line of credit is when you have a set limit of borrowed money per month which you can use as and when it is needed. You will then pay monthly installments to repay whatever amount has been spent. Therefore, it is a type of short term loan as the money that you are using is technically borrowed and needs to be repaid monthly. The exact monthly payment will vary depending on how much of the line of credit has been used.
Unsecured Short Term Loans
An unsecured loan is one which does not require collateral. Secured loans refer to loans which, in order to borrow money, a borrower puts down collateral as security such as their home or a vehicle; this is considered to be less of a risk for lenders and, generally speaking, comes with lower interest rates.
Unsecured loans, on the other hand, can be viewed as more high-risk by the lender. To compensate, lenders usually charge higher interest rates, meaning that if for example you borrow $1000 on an unsecured basis, you will be charge higher interest than for some alternative loan options.
Title loans are a form of short-term financing that allow consumers to borrow small amounts of money by using an asset as collateral. Unlike other loans, title loans are a form of secured loan, rather than the likes of cash advance loans or bad credit loans which are unsecured loan options.
Rather than other loan types which require specific credit ratings or other eligibility criteria, title loans are known to have more flexible application requirements and criteria and can usually be approved quickly. This is partly because the lender has a high value item [your vehicle] as security on the loan. Therefore, if you fail to repay a title loan, the lender may seize your vehicle.
Online Short Term Loans
Many short-term loans can be obtained online, right from the application stage all the way to approval, sometimes instantly. This can be a very quick way to get hold of funding and, in many cases, you can have the money wired directly to your bank account just minutes after getting loan approval.
An emergency loan refers to any short-term loan where the purpose is to cover emergency expenses that may arise and for which you do not have money saved to cover the cost. These loans will typically take the form of a car repair loan or a home repair loan and can even be in the form of a predetermined loan amount, as in the case of a $500 loan or a $1500 loan. However, there are other financial emergencies that could merit using an emergency loan. For example, paying for a wedding, medical expenses or emergency travel.
Short-term installment loans are loans for which you pay back a fixed amount on a monthly basis over a short period of time. Installment loans in the US will usually allow borrowers to borrow money fast, and then be able to repay over many months, making for a more affordable loan in the medium to long term. Installment loans are useful when you need to spread out your repayments over a longer period to make the loan that bit more affordable.
Invoice funding is a type of loan which uses a business’ unpaid invoices. Lenders will loan the amount of money specified in unpaid invoices presented by the business with the idea that, once the invoice is paid, the business can repay the loan. The lender will loan the amount of money and interest based on the number of weeks that the invoices remain as outstanding payments.
Employee Cash Advances
An employee cash advance is a benefit offered in certain workplaces that enables employees to access some of their paycheck in advance of the scheduled payday. This is often suggested to be a viable alternative to payday loans, as asking your employer for a cash advance can help you avoid having to apply for a payday loan or other short term loan down the line.