Short Term Loan- Know The Various Types
Happiness and sadness prevail all through one's life. Whether it is a happy situation or a sad one, a person needs money to handle the situation. Assume it’s your son’s or daughter’s birthday, you might have planned to celebrate it wisely and have planned to gift her awesome bike, you cannot proceed with it if you do not have enough money.
On the other side consider an emergency situation; though it is not a planned one, you need money for that. Whatever may be the reason, money plays an important role in each and everyone’s life. At times the money one needs may be less and at times one may need a huge amount.
Some people might have enough money to handle the situation, but this may not be the case with everyone. There are also people whose money gets locked in investments and mutual funds. So they may not have sufficient money on hand during an emergency situation.
When one needs to borrow a huge amount of money, there are various sources to lend them but when it comes to borrowing a small amount, you cannot apply for a small amount for a longer period and nobody will be ready to give you a small amount of money for a longer period. During such a case, one can opt for short-term loans.
What is a short term loan?
Short term loans are loans that are taken for a short period which in turn means that one can apply for a loan that requires the money to be repaid in less than a year. One can even apply for a three months loan.
Type of short-term loans
Similar to the normal loans, there are also different types of short term loans that one can opt for.
Overdraft: this type of loan is taken when the withdrawal amount from the bank account is more than the amount present in the account. For example, assume you have got only 40 dollars in your account but the amount required is more than that, the extra amount will be considered as overdraft and will be lent if the overdraft amount is within the limit. This will not be the case for all the people who have an account. This case is accepted only at banks which support such loans provided the account holder has already applied for overdraft and has accepted to the conditions. The account holder must have also accepted for the specified interest rate.
Credit Card: Almost everybody in today’s world opt to have a credit card which is indirectly a short term loan that is taken. When one opts for a credit card, the issuer fixes him the credit limit. The user can use the card at different places and must repay the amount within a certain day from the bill date.
Payday Loans: As the name implies, the loan is repaid during the next pay day. This loan can be borrowed even for $50. Assume that you have to purchase something and you are short of some amount, in that case, you can opt for a payday loan. This type of loan is best for small amounts which cannot be borrowed with normal loans. The only important point that one has to note is to repay the amount when you get your next salary.
Money Market: This type of loan is slightly different from the capital market which involves shares and bonds that come under the long-term loan. The money market is a type of loan where many financial institutions and companies get themselves involved in it. The companies and financial institutions sell their commercial papers and other securities in the market to raise their fund.
Bridge Loans: This type of loan is applied when there is no permanent financing for a person or a company. In other words, a company or an individual who is waiting to receive a long-term financial amount but are in need of money to tackle the expenses can approach for this type of loan until they get a proper cash flow. This loan is obtained by backing up some property as collateral.
Still, there are more types of short term loans such as RAL, Friends and family loans and so on. Understand each of them clearly, apply for the loan and get the most benefit out of it.