There is a time in every person’s life when they need some cash immediately. Sometimes it’s a medical emergency, or your car shuts down when you had planned a road trip with your family. In situations like these, short term cobra loans can act as blessings.
How do short-term loans work?
The short term loans mean exactly what they sound like. They are cash loans that need to be paid back in installments usually within a year. Some loans are also paid back in as less as three months. A very common scenario is new businesses that need capital but haven’t earned enough credit to qualify for a business loan. For such a business, a loan like this can finance them temporarily.
Why choose short term loans?
- Interest: Short term loans are paid back in regular installments from a time period of three to twelve months. Agreeably, the longer someone takes to completely pay back a loan. The higher the amount of money they need to pay due to the interest rates. Despite this, the interest rates for short term are lesser than those for long term loans making the former a much better choice.
- Faster: They are easier to obtain than long term loans and are processed faster.
- A wider range of options: The only viable source for a long-term loan is a bank and it often has a tedious process and waiting time. However, the short-term loans are often taken in times of emergency or immediate need. One of the major pros is that there are innumerable options when it comes to taking a loan for a short time. There are sources throughout the web and they are nearly inexhaustible.
Do short term loans improve credit scores?
Understandably, the idea of such a simple loan seems too good to be true. So, it’s obvious that you ask, how will this affect your credit? The short-term loans had some controversies surrounding it since people availed it if they, for some reason, had a bad credit score. However, even these loans, like a long-term loan, are added to credit files including the basic information, i.e. payment history, defaults (if any), amount of money, etc. Even most banks don’t really care if an applicant has applied for short loans if they’ve paid them back diligently. However, there are some risks associated with them that are mentioned below.
Common mistakes made
- Since the loans show up on record, taking too many of these loans can lead to distrust. If a prospective lender sees that you’ve taken too many short-term loans, they might think that your financial status is bad with dwindling funds and they’d thus assume that their money wouldn’t be safe in your hands, even if that isn’t the case.
- Don’t forget to pay back. A default is one of the worst things on your credit score. If you ever think of getting a long-term loan but have a default on the short-term one, it’s understandable that a bank wouldn’t choose you over applicants.
These loans are beneficial for businessmen because a merchant cash advance enables a lender to purchase credit card sales for the future. However, there are many conditions to avail this loan and they’re also a little expensive but the benefits that they bring are also many.
Even though the country and its people have relied on banks and long-term loans due to the sheer experience and trust, the new era of short-term loans is a very welcome change. As the digital age continues to enter our lives, and the world becomes faster and more efficient, the entire concept of loans that can be availed easily and fast are a good turn. Throughout the marketplace, start-up companies have emerged and these loans will help them invest in their dreams. Additionally, in the past, people had nowhere but emergency cash reserves to turn to when they needed money. Now, with the advent of the new technology, cash has become more accessible. All the controversies that surround these kinds of loans also do not have much of a base unless the applicant also makes some basic mistakes which can be avoided by reading this article. So, if you ever need cash, take these loans but with caution.