A short-term loan is a modest loan where the money lent and the interest is paid back in less than a year. Short term loans may be a quick and simple way to obtain funds for people who find themselves with an emergency expense on short notice. The most common types of short-term loans are from family and friends, pawn shops or payday loans. Payday loans are associated with high-interest rates and strict repayment policies and should be considered only as a last option. Below are the different types of short-term loans and a guide on how you can obtain them:
Short Term Loans from Friends and Family
Understand the advantages and disadvantages:
If you don't qualify for a regular bank loan this can be a great option for you because of their lower interest rates and flexible repayment structures. However, there are personal relationships involved and things can get out of hand if there are no proper arrangements on timelines through a loan agreement. Your personal relationship with the lender may be in jeopardy if you default on the loan. Despite your relationship with the lender, you should be aware that you have the responsibility to repay the loan as you would with a money lending Institution.
Agree on a repayment plan with the lender:
You should go to the lender with a clear idea on the amount of funding you need and how soon you can repay. This will help build some trust in the lender of being repaid. Don't overstate your capability to pay back the money, just to get the loan. Also, make sure that the timeline within which to repay the loan in full is clearly set.
Due to the personal relationship you share, the lender may decide to lend you money with no interest rate. You may offer to pay interest on the loan to help persuade them to give you the loan.
Write a loan agreement:
You should draw a loan agreement to safeguard both you and the lender. This contract should clearly state the terms of the loan and show important information such as names and addresses for you and the lender, the amount borrowed, the start date and repayment dates and any other crucial information.
Short Term Loans from Pawn Shops
Resolve to use a pawn shop loan. Pawnshops give modest, collateralized loans to borrowers. The loans are secured with a valuable possession which the borrower offers in exchange for the money. If the money is refunded as agreed in the contract, the valuables are returned to the borrower. If the borrower defaults the loan, the pawnbroker retains the valuables and sells them to recover his money.
Select the possessions that you can pawn. These include items like antiques, electronics, musical instruments, or jewellery. The loan you get is a portion of the price of the item because the lender has to cater for their expenses.
Locate a pawn shop. Choose a top-rated pawn shop with that will offer you loan value with good repayment terms.
Get your valuables assessed by the pawnbroker. The items will be assessed by the pawnbroker to determine a reasonable market price for them. This determines the amount of loan you get as it will be a percentage of this price.
Understand and accept the loan terms. There should be a loan agreement to clearly outline the loan terms such as repayment terms and any fees that might be incurred in case you extend your loan if you can't pay it back yet. You should review the contract terms to make sure that they are in your best interest.
Repay your loan to receive the items back. The last step is to repay the loan within the stated timeline to get your valuables back or to end your contract with the pawn broker if you cannot pay, or choose not to pay.
Getting a Payday Loan
Visit a short-term loan office. Locate a short-term loan office in your area by online search or local phone book and visit them during office hours.
Verify your identity. Provide identifying information to verify your identity. The short-term loan representative may want to see forms of I.D. a state I.D., driver's license, passport, or birth certificate.
Verify your employment. You will be required to verify your employment and income status to as proof of your ability to repay the loan. This can be done by providing your current pay cheques or bank statements.
Write a post-dated check. You will be required to write a post-dated check to the payday loan lender which acts as some sort of insurance that you will offset your loan.
Receive your money. Once you have completed the verification process and provided the post-dated check, you will be set to receive your money. The money may be wired directly into your bank account or you may receive a money order that you will be required to cash.
Return on the maturity date to repay the loan in full. Payday loans tend to have strict repayment plans. You will be expected to repay the loan and interest in full on your next payday. If you are unable to repay the loan within the timeline, the lender may roll over the loan, incurring more charges, or redeem the post-dated check.