Short Term Loans – Dependable and Reliable.

This type of a loan is used by entrepreneurs to finance a working capital need. Based on its name, it should be repaid in a year or less. But entrepreneurs are not the only ones who used this type of loan, students avail this loan to aid their schooling, especially for college students.

Short term loans are helpful when you need money. It is an easy source in times of emergency. Technically, they are almost the same with payday loans as their name implies. Below shows the difference of payday loan and short term loan:

Nature of loan:

Payday Loan: This is a type of loan that is considered as salary loan.

Short Term Loan: This is a type of loan that is paid on an instalment basis.

Payment:

Payday Loan: Should be repaid in two (2) weeks or less or on the payday, hence, the name payday loan.

Short Term Loan: Should be repaid in a year or less on an instalment basis with proposed monthly amount of payment that is reasonable for the borrower and the lender.

Interest Rate:

Payday Loan: Interest rate is very high at 1,500% annually (APR) in UK.

Short Term Loan: Depending on the interest rate offered by the lender. In UK, interest rates for short term loans ranges from 200 – 300% annually, this is way lower compared to a payday loan.

Repayment:

Payday loan: The borrower should issue a pay check to the lender or if not available, the borrower should give access to the lender to his or her checking account to auto-debit the loan.

Short Term Loan: The borrower and the lender have a contract. They have set a monthly loan payment that is agreeable between both parties. Some of the short term loans are mortgages, auto loans and the likes. Repayment is sure as it has collateral.

Legal:

Payday Loan: Some payday loan lenders are deceptive, and use this practice to entice clients. In UK, a lending firm must be registered to be able to operate.

Short Term Loan: Short term loan lenders are licensed and regulated.

Many people opt to engage in short term loans because of the interest and because of the gradual mode of payment. It is also reliable and a borrower is always sure that the lenders are registered, licensed and reliable.

Short term loan is usually dependable for entrepreneurs who need financial capital or a back up capital. Students use this loan also to aid in their studies; even people who just stay at home use this to help in their finances. It offers low interest rate and is not difficult to pay.

There are different types of loans. Some loans can be repaid immediately, on a monthly basis or a much longer time. Anywhere you look at it, still it is credit, and it is still considered a debt. These loans may differ in type, length of time to repay and annual interest rate; they sure have a common purpose – emergency money.

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