How to Know if You Qualify for a Short-Term Loan

How to Know if You Qualify for a Short-Term Loan

Sometimes we all need a quick cash boost. It could be due to a sudden loss of earnings, or a project that needs completing right away. Regardless, sometimes a short-term loan is the only way! If you are considering a short-term loan and would like to know more about them, or if you qualify, then you have come to the right place. Read on for everything you could need to know about whether you qualify for a short-term loan.

What Are Short-Term Loans?

A loan, by definition, is borrowing money for a set amount of time and paying it back over that period. Traditionally, this would be over 1-5 years, though can range up to 15 or so years. A short-term loan tends to define a loan that must be paid back over a period of months rather than years. However, these loans are usually for much less monetary value than a larger or longer-term loan. Many companies offer both, and some offer great deals on specifically short-term lending. With any good lender, you can go to their website and compare deals on shorter lending options. Make sure you do get online and check deals, as interest rates can vary massively depending on loan length and value. More on that to follow…

How Do They Work?

As previously mentioned, a short-term loan is traditionally paid back over a shorter period than a traditional bank loan, which is usually paid over many years. When you take out a short-term loan you must remember that you will need to pay it back quickly. This means that the monthly payments will be larger than a long term loan. This, of course, is not an issue if you are prepared to pay it. 

Interest is charged on all loans, and short-term loans are no different. This means that over the course of the repayments of the loan, you will pay back more than you borrowed. For example, if a loan has an interest rate of 29.9%, you will pay back your initial borrowed amount plus the value of the interest. 

Why Might You Need One?

Short term loans are a great financial option for a few reasons:

  • Fast Approval: Most short-term loans are available to almost everyone! They are traditionally much easier to apply for than a longer-term, large bank loan. If you need a lump sum and need it now, a short-term loan is great for you.
  • Pay Less Interest: Interest is charged for the duration of a loan, meaning the longer you owe money, the more interest you will pay. If your loan is only repaid over 12 months rather than 12 years, you will pay back less over the loan’s duration. If you need a loan and can pay it back quickly, you will save yourself plenty in interest payments!
  • Improving Credit Rating: Many people use short-term loans as a credit booster. Having a great credit rating is very important in the modern world. A strong credit score will help you with future purchases, mortgages, and financed items. Consider a short-term loan if your credit score is low and you need a boost.

How to Know if You Qualify for a Short-Term Loan

Are You Eligible?

Every bank or lender has different criteria for eligibility, so how do you know if you are eligible for a loan? Here are the common criteria considered by lenders:

  • Age: Firstly, and most simply, you need to be over 18 to get any kind of loan. No lender will loan money to those under adult age. This is, of course, a reasonable and sensible decision by lenders. If you are over 18, you have the first step on the ladder towards a short-term loan. 
  • Employment: Similarly, a short-term lending company will likely not lend to you if you are unemployed. If you are not in full-time employment, you will likely not receive a loan, whether it be short or long term. This is again a very sensible move, as if you are unemployed, you would likely not be able to afford the repayments. When someone cannot make repayments, a lender can repossess other items to cover the cost of the loan.
  • Residency: Usually your residency will be important for your loan. A British lender, for example, would not traditionally lend to a non-UK resident. Again, this is for sensible reasons. If you do not have proof of local residency, a lender would not be able to trace you and ensure you can repay your loans. So, only apply for a loan in your own country or place of residence.

So, this should cover every qualification criteria and the reasons behind getting a short term loan. If you were or still are considering a loan, hopefully, this will help you understand whether you are eligible, and make the first move towards getting yourself a loan. Remember to borrow what you can afford and look for the best deals out there.