Short term loans.
Short term loans are offered by a variety of lenders. They also come in many forms and can be used by borrowers to help pay bills in an emergency, cover an unexpected personal expense, or even to pay for costs related to a business. The short term personal loans can be issued in small dollar amounts, they can assist borrowers with poor credit scores, and there are even online lenders as well that focus on certain situations.
Anyone who is looking to borrow money, no matter the reason, needs to be sure they can (1) afford the monthly payments and (2) have the ability to pay it off on time. One of the risks of using a short-term loan, especially to pay bills or expenses such as rent, is starting a cycle of borrowing more and more money. This is always a danger, especially for low income families or those with poor budgeting skills. Therefore, anytime anyone is applying for any sort of loan (whether it is short or long term) they need to be mindful of entering into a cycle of debt.
Loans that are considered to be shorter term in nature can also be issued by payday lenders. These tend to be focused on the working poor, immigrants, individuals with no or bad credit, and others that are not in the mainstream banking system. These are very risky. The interest rates can be extremely high as well as any associated fees. In general, borrowers should stay away from any payday type short term loans.
Borrowers with bad credit or that lack history
Many of these short term loans are targeted at borrowers with poor credit scores. Or maybe they lack a credit history. These loans are often much more costly (higher interest rates, fees, etc.). Therefore shop around. Or look for other options, such as pre-paid secured credit cards or even financial aid from the government.
Consider all alternatives before borrowing money. Non-profit credit counselors can be a good resource to try to improve credit before borrowing money. Or some credit unions as well as local, community banks combine small dollar, short term loans with free budgeting services. This will help any borrower with poor credit address the underlying causes of their hardship.
Applying for short term loans
There are a number of places that can issue these funds. The application process is normally streamlined, so the borrow can often get the money in a matter of hours if not days. This is one reason why the funds can be effective for paying some type of bill in a crisis. Some of the possible places to apply at for a installment type loan that needs to be repair over the short term include:
- Credit Unions – Borrowers need to be members, and most of these lenders operate as non-profits.
- Banks – Many local (and some national lenders) now provide short term, personal type installment loans to the general public.
- Online lenders – There are many companies, including Lendup as well as Prosper among others, provide funds using an automated, online process.
- Payday companies – As noted above, while they issue very short-term loans, the interest rates, fees, and other costs tend to be very high.
- Community banks – Personal loans are often available from these locations, and they provide short term funds to residents of the immediate community.
- Non-profits or charities – Some organizations will offer emergency short to medium term installment loans at zero interest rates, but they will come with conditions including borrowers need to enroll into case management.
- Government - Some state or local human service offices issue funds to pay emergency bills, and they may provide the money in the form of a short term installment loans rather than say grant from welfare.
When applying, any legitimate lender should request some basic financial information from the applicant. This should include things such as total household income, monthly expenses, number of family members, total debt levels, the use of the funds and more. As all of that data is critical to ensuring the borrower can repay the short to medium term loan in reasonable time. If the lender does not ask for this information then it should be a red flag as they more than likely are not looking out for the best interests of the borrower.
Be sure to shop around as well. Review the lender’s origination fees for any personal short-term loan. Compare interest rates, any fees around repaying the money early, rollover types costs, and more. Take a close look at the terms and conditions before borrowing money.
Also, anyone applying for a short-term loan to pay for their monthly bills should explore all other options before going down that path. As borrowing money to pay for expenses such as a car repair, medical or utility bill, or rent comes with risks. As it can lead to taking on extra debt, which is never a good idea.
Applications can be accepted by any number of lenders. For short term installment loans, that are competitively priced, apply at a credit union or community bank first. If those are not options, or decline the application, try a national lender such as Bank of America. If still no success, then try an online lender, and (as a last resort) a payday company. That is the list or lenders to apply at for small amounts of money in the form of a shorter-term loan.