A short term loan is a loan whose repayment tenure varies between a few days to one year. There are different types of short term loans. But you should always try to get hold of the one with a lower rate of interest. Following are the ways of availing the best one:
Examine Total Expenses:
When looking at the borrowing cost of the loan, do not only look at the rate of interest. Understand if any fee or additional charge is involved or not. Firstly check if the rate of interest that has been quoted to you is APR or not.
It will show you the total interest that will include charges and fees and you will have to repay it in one year after borrowing a loan. If the rate of interest increases then the borrowing rate f interest will increase too until it gets fixed for the loan term.
A rate of interest that is capable of changing is called a variable interest rate. On the basis of an individual’s creditworthiness, he will be provided a higher rate of interest.
Thus the borrowing will turn out to be more costly. Some short term loans’ quoted APR by banks include each and every cost of all interest along with the arrangement fees.
Get a proper idea of the early repayment penalty as a fee is usually charged for repayment of a short-term loan. After analyzing the total expenses involved in a short loan you will be able to borrow the best one easily.
Understand If It Is A Secured Or Unsecured Loan
Unsecured loans are fixed at some specific rate of interest for one or more years. It will never be linked to your assets. The quoted rate will be based on an individual’s creditworthiness.
And a secured loan will be held against a property’s value. It is a commitment for a long tenure. If you wish to remortgage for cash release may be for any home improvement, then find out if you really can afford an increase in repayment if the rate of interest increases later.
An unsecured loan is very risky for the lenders as if you fail to pay off the loan amount they have no security to claim on your property.
So unsecured loans are much costly than the secured ones such for instance a mortgage. The unsecured loans also offer a lower amount for borrowing – around 500 dollars on average. So, your property will be risk-free with any unsecured loan.
Quick Repayment Of The Loan:
In the case of a personal loan, if the tenure of the loan is more, then you will be paying more interest. But this does not happen while taking a short term loan.
For credit cards, you can opt for the balance transfer card where you will get credit without any interest for 36 months. Try to clear the total outstanding amount of a credit card instead of the minimum payment each month.
This will make you clear off only the interest instead of taking care of any underlying debt.
The debt will be troubling you when that interest-free tenure will end. Overdraft is a type of short term loan whose extension will assist you in borrowing money for some weeks or maybe months.
Current accounts will offer these facilities and by paying a fee, you can extend the overdraft.
An authorized overdraft that your bank has approved will be less expensive than any unauthorized one where the charges will quickly rise up. Ensure that you have planned your repayment.
Borrowing money without any repayment plan will create financial problems.
Avail A Lower Rate Of Interest:
A good credit score will aid you in getting a short term loan with a lower rate of interest. If a lender analyzes you for a short term loan, he will be having a look at your credit score. So a better credit score will help you in getting a more competitive deal.
Moreover, a high credit score will drive the utility companies to treat you well. Such organizations are basically lenders who see and share information with other lenders. It will thus determine the way these lenders conduct a relationship with their borrowers.
It will also check your creditworthiness and help them to decide how they will respond to your late payments. Improve your credit report by not missing any loan and utility payment, not applying for many credits within a short period, and canceling past credit cards if you have any. It is also important t check credit files to get rid of any false information.
So never rush into borrowing. Understand for what duration you require the money as well as how well can you repay it. Thus these four smart steps will aid you to get the best short term loan and prevent you from financial difficulties in the future.