About 20% of Americans do not have any savings to use in case of emergency. But there are many different events that may require unplanned additional expenses, which can be a trap.
These factors made short-term loans for beginner borrowers so popular. Regardless of the circumstances that force you to look for money, quick loans help you solve your problems. At the same time it should be understood that short-term loans are not free and have rather high interest rates, therefore it is necessary to take full responsibility for its obligations. In order to use the opportunities offered by short-term loans and prevent unpleasant consequences, it is worth understanding how they are arranged. That is why we’ve created this detailed guidance for beginner borrowers.
What is a short-term loan?
Short-term loans may be issued for different purposes and have different terms, but usually less than a year. This is not one type of loans. The concept of a short-term loan includes different types, which we will look at in this guide further. They can be both targeted and without restrictions on use.
Also, short-term loans can be secured or unsecured, among which unsecured have become very popular, since with this type of loan borrowers do not risk their property.
Now let’s take a closer look at the existing types of short-term loans for beginner borrowers.
1. Credit Cards
Credit cards allow you to quickly get money and use them to solve problems or any other purposes. Thanks to a revolving credit line you can use this credit multiple times, if you timely repay the previous loan. This made credit cards a very popular financial tool in the US.
2. Payday loans
One of the popular types of short-term loans are payday loans. Despite the fact that they have high interest rates, these loans have a minimum requirement for borrowers to approve. The amount of payday loans usually does not exceed $ 2,000, but it mainly depends on the level of your income. This type of loan has the shortest period and usually ranges from two weeks to a month and is tied to the paycheck day of the borrower.
3. Loans for bad credit
Short-term loans for beginner borrowers provide the possibility of borrowing to those who for some reason have a low credit score. With this type of loan, the lender does not conduct a strict credit check and when making a decision is based mostly on the borrower’s income level.
4. Consolidation loans
When you have accumulated several different loans that become difficult to repay at different times, debt consolidation is a good way to make your life easier. Combining debts, you get one payment, instead of several, as well as in the end a smaller amount of payment.
5. Flexible loans
Flexible loans provide larger amounts to borrowers than most types of short-term loans. In some cases, the loan amount can reach $ 25,000, depending on the conditions in which the borrower is.
How short-term loans are issued
Short-term loans, like any other, are issued by lenders in order to earn on it, thanks to the interest. The interest rate expresses the interest of the lender and should cover risks. The more risky a loan is, the higher the interest rate. At the same time, for a borrower, the lower the interest rate, the less he will pay on top of the borrowed amount.
In addition to the interest rate, there are other payments and commissions that you will most likely have to pay to the lender, but the interest rate will make up the bulk of the lender’s income.
The interest rate and commissions added to the loan amount will form your monthly loan payment, which must be made no later than the due date in order to avoid penalties and increase the loan cost for you.
Also, your credit will affect your loan conditions. The higher your credit rating and the better your credit history, the more acceptable loan conditions you can count on. When your credit rating is high, it means that you are a less risky borrower, so the interest rate for you may be reduced.
To get the best loan terms control your credit rating, do not let the payments pass, don’t do a lot of borrowing and your credit will be in good condition, which will increase your financial capabilities.
When it comes to short-term loans, it often becomes more relevant to your income than the state of your credit, because lenders are counting on it to get their money back.
Also, the loan amount will directly depend on the level of your income. Lenders apply a certain ratio of income to debt to determine how much you can pay off monthly from your salary.
Disadvantages and risks
Despite all the advantages of short-term loans for beginner borrowers, they are quite expensive compared to other types of loans due to the high interest rate. Before you apply, assess the need to take such a loan, weigh your ability to repay it on time and all other factors.
Many types of short-term loans may seem readily available, but they can be costly if something goes wrong. Use short-term loans only in case of really great need and count how you will pay it.
Choose a loan
When you realize that you still can’t do without a short-term loan, start searching for a suitable loan and a proven lender. You can use the loan application form on our website to get offers from many lenders at once.
If you have any questions, just email us and our experts will advise you on the choice of loan.