When people are applying for loans, they are at times misguided in terms of process and agreement conditions. Then these lead to confusion on the part of the borrower as he hesitates in applying for the loan. If the applicant is ill-advised, it is because the person who is giving the consultation had some issues but it doesn’t mean that you will have the same problems.
People have spread many misconceptions about short term loans that are so untrue. They need to be corrected as they can mislead the applicant and cause damage to the business if the money is not received on time.
Common types of Short Term Loans:
These loans are applied to fulfil the need of amount for a limited time frame. Short term loans can be borrowed not only for business purposes but also accomplish personal goals. The amount that can be borrowed starts from $100 to $100,000 with repayment terms up till one year. Here are 5 types of loans that are commonly applied for;
Lines of Credit:
This works like a credit card where a limit of the amount is previously set and the borrower can take out that specific money. The repayment amount depends on the amount that is borrowed and once the amount is repaid it comes back and you can borrow it again.
Merchant Cash Advance:
This is an advance that you get on the basis of your credit card purchases, whether you can repay the loan in time or not. The payment is full and the borrower has to pay back the loan amount in either 90 days or 18 months.
Online or Installment Loans:
They are simple loans that can be applied through an online website like Orumfy. The terms and conditions, as well as the interest rates, are different from one website to another. These can be banks and also individual lenders.
Payday loans are the easiest short term loans to apply for. The loans can be obtained even from high street lenders which a lump sums amount. But the repayment must be done at n=once when the due date arrives.
This loan financing is received on the basis of the invoices that the clients of a certain business has not yet paid but will be in the future. The more invoices received will assure that the larger amount can be obtained.
Misconceptions Needed to be Rectified:
Many people have spread a lot of misconceptions about short term loans that need to be corrected because it is causing chaos and confusion in the mind and lives of the borrowers who genuinely want to invest the amount in their business.
It can be true for the traditional loans that are obtained from the banks. But these loans the process is easy and can be approved instantly; within a day or two. The application has too complicated terms and conditions a simple form is filled and you can get the loan in no time.
Require an Excellent Credit Score:
There are many types that can be acquired if you have a bad or even zero credit score. Most of the borrowers of these loans are people who want to start up a new business so they will not have any prior credit score. So it is not necessary that you have it.
Need Documents to Qualify:
It has been debated earlier than the normal loans require a long list of documents and paper works to complete the process of application but the short term loans need minimal or no documents to get the loan amount.
Too Much Expensive:
It is right that the rate of interest is higher than conventional bank loans but there are many fees that the short term loans don’t charge. Only an interest rate is owed to he borrowed rather than any other fees in a bank loan.
Get Loan only Through Bank:
Another misconception is that these loans can only be obtained through the bank. But it is false as there are many individual and online lenders are available that have the resources to provide you with the loan amount.
Lend Straight Away From SBA:
SBA or Small Business Administration is a program that operates with banks and other lenders to provide a guarantee. This institution does not provide the money directly but decreases the risk of fraud.
Borrowing a Small Amount:
People think that they can only borrow a small amount of money as the name is short term loans but you can borrow up to $100,000 and also the loan will not be approved if you ask for the higher amount.
Unknown Terms and Conditions:
There are no hidden terms and conditions when you are applying for these loans. The repayment is determined on the loan amount; interest rate and the time period within you are going to pay back. So no extra amount can be charged in the name of hidden terms and conditions.
It is hoped that you have understood the true nature of short term loans and the wrong impressions that were given to these loans.