Short term loans can have a repayment period of anywhere from a month to two years. Some short term loans have a repayment period of more than two or three years, typically up to five years. Whether it is a secured or unsecured loan, the repayment term is unlikely to have an auto renewal clause applicable if the period is three to five years. Loans with repayments terms of up to two years are a different story. Usually, short term loans with repayment periods of a year to two years will not have auto renewal. Loans with much shorter repayment terms tend to have an auto renewal clause.
What is the Auto Renewal Policy of your Lender?
All borrowers compare rates of interest, eligible loan amounts and other terms of repayment. Auto renewal does not feature as prominently as one of the criteria but it should not be ignored entirely. Auto renewal policy is basically extending the repayment term of a secured or unsecured loan for a specific period of time. If a loan had an original repayment term of ninety days, then the renewal can be for another three months or less. The auto renewal or extension in this case can also be just a few weeks. The entire premise is contextual and the policy is at the discretion of the lender.
Importance of Auto Renewal Policy
It is better to have more time to repay than to get into a bad debt. But there can be unpleasant surprises, such as a hefty penalty and steep hike in the applicable rate of interest. Not all lenders renew the repayment term. Some do it automatically. Others do it after consultation with the borrower. A few lenders are flexible. You should know this policy so you can be certain of your financial obligations if you fail to repay on time.