How Does A Short Term Loan Work?

If you are going through minor problems of cash flow, then a short-term loan will be providing you a great solution. Contrary to traditional bank loans that are repaid over many years, this loan is structured in such a way that it must be paid back within few months.

What Are The Eligibility Criteria For A Short Term Loan?

Short term loans are quite flexible. But still, they are never available to everyone. Mentioned below are some of the eligibility criteria that are essential for a short term loan.

  • You must be a permanent resident of the US.
  • You must be at least 18 years old.
  • You need to be a salaried employee.
  • You must have a stable monthly source of income (for example social security and disability scheme)
  • An open, as well as an active checking account, is required.
  • Applicants with a credit score can also apply.

What Is The Process of Applying For A Short Term Loan?

The application and approval process of a short-term loan will be depending on the state you live in as well as the lender with whom you are applying for the loan. There are various types of short term loans present in the market. But the typical process of a short term loan will involve the following things mentioned below:

Make A Comparison Of The Available Options:

If you wish to get hold of the best loan, then must start to compare the different options available to you. Compare the rate of interest, fees along with the features to avail a loan that will meet all your requirements. You then choose an amount of the loan that you can afford for borrowing and it includes the rate of interest and the total amount that you have to repay.

Submit The Application:

Check the eligibility criteria of the lender. If you fulfill it, then submit your personal, financial as well as employment information that will be needed. You also agree upon a certain term to repay the loan completely irrespective of whether it’s a one-time payment or many. The date for repayments must be agreed on with your lender. It can be frequently completed online.

Wait for The Approval:

The lender is seen to do a credit check for accessing a borrower’s financial history. You will get aware of the loan approval fast after you submit the loan application. If it is successful, you will be receiving the loan. On getting the approval for your short-term loan you will be sent a contract for the same to agree upon.

Get The Loan:

After you have signed the loan contract, you can wait to get the loan in 1-2 working days or maybe very soon. In most cases, the loan is transferred to the applicant’s bank account. But some lenders also offer the option of receiving the cash from the store.

Repay The Availed Loan:

Different lenders arrange for repayment in different ways. You may be asked to sign one ACH authorization that will give the lender the permission of deducting the installments from your account.

Lenders who have physical branches can be provided with one personal check for the loan repayment. You will start to repay the loan on the decided date and continue to repay it until it is fully paid off.

What Are The Fees And Charges Involved In A Short Term Loan?

Lenders and the state that a borrower resides in are the two factors for deciding the fees and charges of a short term loan.

It generally charges a fixed fee on the basis of the borrowed amount. For every $100 borrowed a fee of $10-$30 for each $100 can be expected. A fee of amount $15 for the borrowed $100 is quite standard.

So if it is a 2-week plan such terms will be equating to almost 400% APR. Moreover, lenders will mostly outline monthly as well as annual fees beforehand. If there is any late payment or even a single default on your short term loan, additional fees can be charged.

Timely repayment and payment of all required fees are important and must be done as otherwise, the lender may take you to court. So always borrow such an amount of a short term loan that can be afforded by you and where you will never miss a single repayment.

This is because high late payment fees will sink you into more debt. If you find that you are struggling to make repayments, contact a lender for any arrangement.

So if you are in need of immediate cash suddenly you can apply for a short-term loan. But always borrow the amount that you need and can pay it off within a short time. Borrowing more than the required amount will make the repayment much difficult for you.

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