Short-Term Loans for Bad Credit


If you have bad credit, you might think getting a loan is impossible, but there are institutions that offer short-term loans for customers with bad credit. Let's take a look at what short-term loans are, some pros and cons, and how to choose a short-term loan lender. 

What Is a Short-Term Loan?

According to Entrepreneur, a short-term loan is a loan that is "scheduled to be repaid in less than a year." Short-term loans are available for businesses and individuals, and their maturation time depends on the amount of financing given. Generally, short-term loans are a type of loan that must be payed back in a short amount of time, and short-term loans can even have maturation periods as short as 90 days.

What Are Short-Term Loans Typically Used For?

Because short-term loans must be paid back quickly, they are typically used for situations such as:

  • Medical emergencies
  • Home and auto repairs
  • Business expansions
  • Business emergencies
  • Cash flow issues

Short Term Loans: Pros and Cons 

As with any type of financing, there are pros and cons to securing a personal or business short-term loan. Pros and cons include:

Pros

  • Quick financing for immediate needs
  • Not a serious commitment 
  • Collateral not typically needed 

Cons

  • Typically have higher interest rates
  • Shorter repayment dates
  • More susceptible to default
  • Higher penalties if default is realized

Choosing a Short-Term Lender

It is important to find a lender that is transparent about the application process. In order to qualify for a short-term loan, you will likely need to present your lender with a credit history, bank statements, payment history, personal identification, and more. And in order for a business to qualify, it will have to present documentation, including payment histories, cash flow history, and income statements. Choosing a lender who tells you what information you will need ahead of time will make the entire process easier. 

You will also want to choose a lender who offers different loan options as well as competitive rates. You can typically find out this information by visiting lending institutions or contacting them over the phone. If the lender you speak to isn't being straightforward about their options and rates, it's best to keep searching.  

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Sources:

Entrepreneur: https://www.entrepreneur.com/encyclopedia/short-term-loans

QuickBooks: http://quickbooks.intuit.com/r/loans/when-and-how-to-use-short-term-loans-for-your-small-business/#sm.000000i841s4i8f4suqc6lr5ejps3

Loans: http://loans.laws.com/short-term-loans

BizFinance: http://bizfinance.about.com/od/businessloans/qt/short-term-small-business-loans.htm

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