211 likes | 376 Views
Short term loans are essentially cash advances that are given to people in times of immediate need of cash and that is one of the main reasons why these loans are becoming increasingly popular.
E N D
Short term loans are essentially cash advances that are given to people in times of immediate need of cash and that is one of the main reasons why these loans are becoming increasingly popular. There are different purposes for a short term loan and the number of applications has increased in the last few decades. The financial uncertainty has added to the problems that the people are facing today and as a result of that, it has increased their dependence on financial institutions.
Long term loans are not affordable for many and many people belonging to the lower classes of society do not have access to these lines of credit. These short term loans are now finding their importance amongst college students applying for scholarships, people paying for their mortgage, covering business needs and many others.
Let us discuss some of the important purposes that short term loans can be used for: Short term loans for students are primarily used for students who have cash flow problems due to unexpected situations that may arise. In order to apply for short term loans, a student must understand the terms and conditions before applying for one.
Short term Loans for College Students: • Short term loans for college students have a limit of upto 500 pounds. There are certain students who want to receive cash-in-hand usually have a limit of upto 100 pounds. A higher amount is usually paid via cheque or direct deposit. • Students must be admitted to a degree program, utilizing 6 credit hours as an undergraduate student and 5 hours as a graduate student, during the term of the application.
If the application for financial aid has not been completed, the student must have verifiable employment or co-signed with another employer to ensure repayment of the loan, once the term has expired. • Short term loans for educational fees are usually not allowed. • No short term loans will be given against expected financial aid by a student. The financial aid needs to be completely approved by the authorities in order to make the student eligible for the loan. • Students are always allowed 2 short term loans per semester and this is mainly because students shouldn’t find themselves into the habit of borrowing money.
Short term Loans for mortgage properties (bridging loans): • The bridging loans market has grown steadily in the recent years, as borrowers try to complete their property purchases to secure their dream house. • Borrowers usually pay a high price for bridging loans with arrangement fees of one per cent in addition to one per cent per month. • This could mean 10000 pounds in fees and interest in just the first month. The bridging loan could be for as short a period as 2 months, it could rack up 20,000 pounds.
There are different ways of deferring payments and especially when your home is at stake, you could sell your home, pay off the mortgage on your existing home and cover the debt of the future home by applying for a loan with a smaller interest fees. • They are an expensive source of finance and the Financial Conduct Authority has expressed these loans as one of the last resorts for borrowers.
Short term Loans for Small Businesses: • Short term loans are helpful to businesses, especially retail businesses that are seasonal in nature. Such a business need a short term loan usually during the holiday season, and this loan is repaid at the end of the holiday season. • Other uses for short term funds are to increase the working capital so that you are able to meet your business needs. This is because it is important for you to have enough capital for your payrolls, for paying your bills and so on.
The interest rates on short term loans are usually higher than long term loans but in recessionary times, the interest rate can be lower. Short term loan rates are usually based on the prime interest rate plus premium.
Start-ups find short term loans a more feasible option than long term loans and this is mainly because they are considered less risky than long term loans. Start-up firms have to present extensive documentation to the lender such as the project cash flow statements for the next 3-5 years along with the anticipated financial statements for the time period of the loan. • It is essential to understand that small businesses find it extremely difficult to operate without short term loans and this is needed for an economy to operate smoothly; as start-ups are always strapped for cash and do not always have money.
In order to qualify for a short term loan, it is essential to present comprehensive documentation to the lender whether it is a bank, a credit union or another financial institution. It is natural for a lender to ask for your earlier loan repayment history, as it builds confidence in the lender and also gives him an idea of how quick you are about your repayments. A lender also considers your business’s functioning and how regular you have been about your payment of bills, payment to suppliers, and payment to employees.
All these factors contribute to whether you can get the loan or not. Businesses have found short term loans to be an excellent source of finance and have found these loans to be a blessing during season times, when they require the extra cash to finance their immediate needs.
In conclusion, short terms are considered more of a blessing than a curse in difficult times and are being considered by people belonging to different walks of life. Short term loans have been seen as an opportunity by many financial institutions to bridge the gap between the lender and the borrower, bringing short term finance to many borrowers is an ideal opportunity to keep the economy in check, as it reduces the debt cycle.
The scrutiny of applications also needs to continue, as it leaves no room for fraudulent practices adopted by either side. All in all, short term loans are here to stay.
For more information go here: www.trueblueloans.co.uk