Loans are acquired for various reasons – for education, business or investment, to finance a large purchase such as a home or appliances, or for emergency expenses. It can also be for financial requirements. A loan is a huge commitment and responsibility therefore borrowers must seriously evaluate, weigh in the pros and cons before deciding to procure a loan particularly for first timers.
Whether you are probing the idea of applying for a loan for your business expansion or personal needs, you must understand that loans have different features in terms of eligibility, interest rates and repayment term. If you are planning to have a loan it is best to first consider the benefits of short-term borrowing and here’s why:
Flexible Payment Tenures
Short-term loans are favorable by having flexible payment terms that usually range between 3 months to a year. This will offer much convenience depending on your payment capacity and with shorter tenure. Borrowers will have an option to make payments within the approved tenure.
Solution for Unexpected and Beyond the Budget Expenses
For any individual or entrepreneur, applying for a short-term loan is ideal. For small business owners who are not eligible for a bank loan or for those individuals who are facing an unexpected financial burden, they can benefit from short-term loans.
Build Good Credit Scores
Short-term loans have smaller risk factor and can be favorable for borrowers. Processing time for this type of loan is faster compared to long-term. Due to the nature of a short-term loan, borrowers can easily maintain a good repayment ability which will be constant over a shorter period.
Saves Money on Interest Penalty
With short-term loan, total payments for interest are much lower since it is within a short tenure. This loan option will allow savings with lower interest rate applied over a short period of time.
Save Credit Card Spending Limit
Loans and credit cards both offer options to secure funds providing borrowers easy access and immediate credit. They may have similar credit requirements but credit cards are totally different since they rely on revolving credit.
Short-term borrowing consists of a small loan amount that is available within a short period of time and is expected to be paid off within a year or less. Usually, it is considered if the person or the company is falling behind in payment, facing a minor loss, or is trying to accommodate another operational activity.
More and more people and businesses prefer this type of loan because it does not incur a huge interest and is easy to apply. You don’t need to present collateral and most lenders only require valid IDs and a bank account for the borrower to qualify. But just like the other types of loans, short-term borrowing must be taken seriously. It must be paid regularly because even if the amount of loan is just a little, it can still give you too much headache and bigger financial problems it left unattended. Paying your loans on time or beyond what is required monthly should be one of your goals as a responsible borrower, no matter how big or small the amount of loan is.