What Is A Short Term Loan?
If you are new to the line of credit and planning of taking personal loans Singapore for the first time, you might be wondering what a short term loan is. Don’t worry, because it’s no rocket science. A short term loan is a loan that you have to pay back within a short period of time varying from 1 to 12 months. Now, the repayment period depends on the amount of loan you are taking, and most importantly, the scheme of instalments offered by the organization.
How Short Term Loan Can Help You?
Have you ever been to a situation, where your payment got postponed and you have got something important to invest in? Or, you are getting a onetime offer that you know you can afford, but at present, you don’t have the cash to avail it? What if you need raw materials for production, but don’t have enough capital to get them? That’s when these short term loans come handy as well as beneficial. You can avail the money, fulfil your requirements, and once you receive your payment, you can quickly repay it back.
Pros And Cons Of Short Term Loans
However, before you jump to any conclusion from the above-mentioned benefits, you should remember that each coin has its 2 different sides. Similarly, a short term loan has its own advantages and disadvantages too. And it would be wise to know about both of them.
Advantages Of Short Term Loan
- Let’s go ahead with the advantages first. As you already know, the repayment period is pretty short and hence, the interest that you have to pay will be less too. Besides, some of the short term loans come with nominal interest rates, which you can easily avail. Also, as the repayment period is low, the sum provided as the loan is not hefty.
- Now, this low loan amount has its own advantages too. You might be guessing what are they? Allow me to enlighten. If you are taking a low amount as a loan, your credit score doesn’t matter much to avail it. However, if you are paying it back on time, your credit score is going to get improved, just like any other mid term loan or long term loan.
- One more fact that requires mentioning about short term loans is the amazingly low processing time. And the application demands for the least possible paperwork which saves your time too. Furthermore, and perhaps the most important part of a short term loan, is that a short term loan doesn’t require a mortgage/security in general. You only have to show a regular source of income that meets their requirement and you are good to go.
Disadvantages Of Short Term Loan
- While going through all these advantages, you might be thinking, what disadvantages can be there? As said earlier, every advantage comes with a disadvantage. Since there is less paperwork, that subjects to risk, where you may not have enough documents to back you up in case of a legal procedure.
- Meanwhile, unlike the mid term and long term loans, you have to keep repaying quite frequently. Most of the short term loans demand repayment either on a weekly or monthly basis. Now, this can be risky if your payments get delayed more.
- The interest rates for these short term loans are higher in comparison to the midterm or long term loans. And most importantly, you have to pay a big amount of penalty, every time you miss your repayment date. So if you end up failing to repay a few of the instalments, the loan amount starts to look huge ultimately leading to a catastrophe.
Types Of Short Term Loans
Adding more to your knowledge, there are 4 types of short term loans available at present from where you can legally and officially opt for. These 4 main types are invoice financing, payday loans, line of credit and merchant cash advance.
Invoice financing also is known as ‘account receivable financing’ is a loan that you get in exchange for showing the invoices. Suppose your customer will pay you the entire payment next month, but you need money now to complete his order? You can show the generated invoice with the estimated date of receiving payment to the bank and you can get your loan. All that you have to ensure is that you pay the money back on time.
What about Payday Loans? These are the loans that you get by submitting a post-dated cheque. For example, you are going to get paid on a particular date which is confirmed. So you can hand over a post-dated cheque of your account to the bank and they will pay you the money. On the date mentioned in the cheque, the bank will deduct the money along with the interest directly from your bank account. So make sure that you already have balance in that particular bank account, whose cheque you provided.
Line Of Credit
The best way to describe how the line of credit works is a credit card. In the line of credit, you already have a particular credit limit up to which you can avail just like credit cards. The credit limit depends on a number of factors like your income, source of income, credit score etc. Once you avail the loan, the instalments for repayment will start as chosen by you. It can be monthly or even weekly.
Merchant Cash Advance
A merchant cash advance is not actually a loan. In this type of financial deal, you can avail financial help from companies in exchange for your future debit/credit card sales. Now, you might ask, why would you avail this type of deal at all? At times, the small businesses who don’t qualify for bank loans opt for these types of deals. In Spite of the rates being higher in comparison to others, the small merchants find it beneficial because of the financial opportunities provided by these organizations. And once the loan is repaid, you are good to go on your own again.
Financial Institutions Offering Short Term Loans
Meanwhile, to avail a loan, you need to know about places and financial institutions from where you can opt for short term loans at a lower rate.
While talking of availing a loan, the first option that comes to anybody’s mind is Bank. Yes, that’s the safest option to avail cash loans. The bank contains the money of the public and uses them to earn more. In exchange, they provide interest to the people depositing the money in the bank based on the amount of money deposited. And since the money belongs to the public, the bank ensures that they are giving a loan to the correct person, who can repay in time. So, to avail a loan, you have to go through thorough paperwork along with a mandate background check. Some of the popular banks in Singapore from where you can avail a loan are HSBC, CITI Bank, OCBC bank etc.
• Money Lenders
The next common option that some are aware of is money lenders. These are non-banking organizations, which pay loans in exchange for high interest in comparison to that of banks. In the majority of the cases, the person asking for a loan from these organizations is because he/she failed to qualify for a bank loan. Since the lending is riskier because of the rejection from the bank, the money lenders charge higher interest to secure their capital. Meanwhile, the person failing to avail a bank loan in need agrees to the high-interest rate to avail the loan. Some of the money lending organizations in Singapore are A1 Credit, Bugis Credit, KBB Credit etc.
• Private Funders
And last but not the least, private funders. Now you might be thinking what’s the difference between private funders and money lenders? Actually there lies a thin line. Private funders can be anybody like your friend, parents, relatives or even your business partner. In this type of transactions, in general, people offer much lower interest rates and the least amount of paperwork required with maximum flexibility. However, if you are into a regular money lending business, the last option might not suit you, as it is tough to manage private funders every time you need a loan. But perhaps that’s the only option to avail an interest-free loan in Singapore on a short term.
How To Choose The Best Short Term Loans In Singapore
Now that you have a general idea about short term loans, along with places from where you can avail them, you are in a dilemma. You might be thinking, which one is best for you. Let me tell you, there is nothing wrong in it. But, you must look before you leap. So you must be aware of the amount of loan and their interest rate, different banks and organizations are providing.
• Loan comparison site
If you need a personal loan frequently and on a short-term basis, the best option is to avail a credit card. The interest rate of a credit card is lower in comparison to other interest rates. You only have to swipe your credit card and the short term loan is approved. Thinking of how to do that? If you do some research online, you will find some useful websites providing you with the comparison of all the organization’s interest rate and availability. On top of that, they will provide you with the maximum and minimum amount you can opt for. Going through these different sites will not only make you aware of the right time to opt for a loan, but also improve your knowledge of the economy.
• Licensed Money Lenders
However, if you are in a hurry and still not sure which one to opt for, a private licensed money lender seems to be the best choice. You won’t have to go through a lot of paperwork unlike banks and will avail your loan shortly also. But make sure that you are not taking too much, because their high rate of interest may cost you a huge sum of money.
Meanwhile, if you are looking for trustworthy and fast loans, Singapore got companies like Fortune Credit that can be of great help. You just have to provide your name, phone number, your income, and the amount of loan you wish to opt for on their website.
Within half an hour, your preliminary registration will be completed, and within a day or two, the short term loan will be credited to your account.