When is it the right time to take a short-term loan?
- Benefits of short-term loans
- Will I be accepted for a short term loan?
- Factors to consider before getting a short term loan online
Short term loans are becoming increasingly popular in Canada both as a cash flow stop-gap for small businesses and as a personal loan to tide you over till the next pay check.
As you know, life happens. Unexpected events can occur that leave your finances short. Perhaps, your car broke down without notice. You need an emergency visit to the dentist, or you need small cash for a critical house repair job. Could be your small business needs a quick cash infusion to take advantage of a seasonal high-volume sales cycle. Alternatively, perhaps, you came upon an unexpected business opportunity, but you had little cash to take advantage.
Short term loans are the perfect option when you need a small amount of cash for a short time. They are also a flexible financial tool to see you through a cash crunch. Be aware that short term loans typically have high-interest rates. Since you are paying back the credit within a short time, lenders often charge a higher interest compared to other loan products on the market.
That said, financial experts recommend before you take out a short-term loan to first, plan out how much you’d need and for how long. And, also to be sure, you can repay the loan on time. Keep in mind too that short-term loans are not suitable options to finance major expenses. For instance, don’t take out a short-term loan to pay for a car loan or buy new equipment for your business or downtime payment for a new home.
Use short-term loans as a temporary financial solution to tide you over till the next pay check or your account receivables are cleared. You may want to shop around, compare rates from different lenders before committing to any product. Use online short-term loan comparison site such as moneezy.com to compare rates from different lenders for the best deals.
Amazing benefits of short-term loans
Short-term loans offer unique benefits that continue to make them an excellent option for quick cash to tide you over when you are in a financial squeeze.
- Short-term loans usually have a smooth, straightforward application process.
- No lengthy, tedious paperwork to fill
- No need for a collateral or asset puts up against the loan.
- The loan amount is typically small ranging from $100 to $1500 depending on the lender.
- No need for a strong credit score to be approved.
- Quick pay-out – you receive the loan amount directly in your bank account once your loan request is approved.
When filling the form for a short-term loan, you may want to spend some time to read through the fine prints. Often, lenders may have hidden charges and terms tucked somewhere.
Are you suited for a short-term loan?
Before applying for a short-term loan, you may want to be sure that taking out the loan is the best option for your situation.
Here are things to consider to know if short term loan is right for you:
- When you’re short, and payday is still a couple of days away.
- An emergency occurred, and you need quick cash to resolve it.
- If your business has a high turnover, but you need money to purchase a hot product.
- When your business is seasonal. And, it would help if you had the capital to restock ahead of a busy season.
- When your business is in a cash flow fix with account receivables couple of days off to be cleared, and you need cash to keep things running smoothly.
How do you apply for a short-term loan?
As stated earlier, applying for a short-term loan is a straightforward affair. Here are the steps to follow:
- Visit the lender's website to complete the short-term loan online application.
- Fill out and sign the loan agreement form
- Get credited immediately after your loan application has been approved.
Eligibility requirements for a short-term loan
Typically, each lender has its set of rules and criteria that borrowers must meet before they can consider their applications.
However, there are general requirements that cut across all lenders. Before applying to a loan provider, check their criteria to be sure you qualify for their loan.
- You must be at least 18 and a Canadian resident.
- You must be employed
- You must have a Canadian bank account
- You will be required to provide an active email and mobile number.
You can go ahead to submit your loan application once you meet these requirements. However, note that satisfying these criteria does not mean your loan application will be approved. It means your application can now be considered.
How much does it cost you to take a short-term loan?
The total cost for a short-term loan is the sum of the loan amount and interest accruable to the loan.
As an illustration, let’s say you took out a short-term loan of $500 to be repaid over a period of 4 months at an annual percentage rate (APR) of 1250.4%. To learn more about APR and how it impacts the final amount you repay for the loan, please check out our article about online loans.
A breakdown of the monthly repayment plan for our example above would be:
- $180.55 in the first three months
- $172.96 one-time final payment.
When you add these sums together, you have $714.61 which is the total amount you will pay back on a $500 short term loan for a four months term. The interest charged is $714.61 minus $500, which gives you $214.61.
As you can see, the interest on short term loans is high. Hence, we recommend doing your due diligence to be sure you can repay the loan on time before applying.
Should you take out a short-term loan?
Short term loan could come in handy when you are in a financial crunch, need a fresh infusion of cash to keep your small business open, or when you run into unexpected emergencies. However, there are situations where it is not recommended to take out a short-term loan. For example, if you just lost your job or need the loan to fund a long-term expense. In this situation, talking to an expert for the best options available to you might be the best course of action to take.
A takeaway from this article is: before applying for a short-term loan, be sure that you can comfortably pay back the loan within 30 days without having to take out another loan. Of course, you will have moments when a short-term loan is your best option to handle a financial crisis, in those periods, you may want to use comparison sites like moneezy to find the best cheapest deals available.