Personal Finance

What Is Good About A Short Term Loan?

October 12, 2022

Sometimes, you may find yourself in an urgent situation, in a bind and struggling to find a small amount of cash to cope with the emergency.

Did you know that such you can take out a short-term loan to address the situation?

So what is a short term loan? Well, a short-term loan is a type of loan that is a popular option because of its easy payback terms.

The loan is usually repaid within a year’s time.

As you can imagine, an unforeseen circumstance or a small medical emergency can be easily resolved with short-term loans.

Perhaps you are in need of cash to bridge the gap between two pay checks, or need to fork out cash for a short trip.

A short-term loan can be used to pay for these expenses without putting a dent in your savings or causing you to spiral into debt.

What Is A Short-Term Loan?

A short-term loan typically involves smaller loan amounts – from $500 to $3500.

It is an unsecured loan that does not require collateral.

It is usually paid back within a year’s time.

An unsecured loan means that it has no collateral attached to it, and you don’t need to pledge a property or any valuables as collateral to qualify for the loan.

What Is Good About A Short-Term Loan?

A short-term loan is a popular option due to its easy terms and conditions, quick approval time and minimum criteria.

It is usually paid back within a year, with repayment installments paid monthly or every payday. Such loans are also approved quickly, which means you can get the capital you need within 24 hours.

A short-term loan can be acquired from various lenders, out of which licensed money lenders are a trustworthy and reliable option.

A short-term loan is also sometimes known as a cash advance, payday loan, fast loan, payroll advance, or payroll loan.

Some money lenders and banks may use a different term for a short-term loan, so it is imperative that you know what you are getting yourself into before you apply for a loan.

Types Of Short-Term Loans

There are numerous types of short-term loans available from reputable licensed money lenders like GS Credit or financial institutions such as banks.

Some of these are:

Payday Loan

This is a good alternative if you have a low credit score. Let’s say there is a sudden home repair emergency, and your payday is quite a few days away.

You urgently need the money, but taking it out of your daily budget would disrupt your daily expenses.

In such a scenario, it is a good idea to apply for a payday loan, through which you would be able to handle emergency situations without putting yourself in a dire situation.

An important thing to remember when taking out a payday loan is that it needs to be paid off in a lump sum as soon as your payday arrives.

Emergency Cash Loan

If you need some cash urgently, apply for an emergency cash loan.

Medical emergencies, or urgent repairs around the house or for your vehicle can be used for an emergency cash loan.

Bridging Loan

A short-term loan option that is used to bridge the gap when paying off a new home and selling the old one is called a bridging loan.

It is especially useful when your property is still going under the process of sales, and you need to pay for the new home.

A bridging loan can help you pay off the mortgage for both homes.

Note that bridging loans incur a higher interest rate and higher fees as compared to other short-term loans.

Line Of Credit

To overcome any cashflow problems, a line of credit may be what you need.

With a line of credit, you would only be charged interest when you decide to withdraw from it. That means, if your line of credit has a limit of $20,000 but you have only used $5,000, then the interest would only be applied on the $5,000 that you have used.

Pros And Cons Of Short-Term Loans

Like any other type of loan, a short-term loan has its perks as well as drawbacks.

Pros

Here are some of the most important benefits of a short-term loan from a licensed money lender or a bank.

It Is Highly Convenient

A short-term loan is one of the most convenient loans to get approved for.

The requirements and credit checks for a short-term loan application are minimal, which make it the perfect type of loan in emergency situations.

Licensed money lenders offer quick approvals, require basic criteria and have a simple application process, enabling you to get your loan as quickly as within 24 hours.

Most short-term loans also do not require you to keep any property as collateral, making it a less risky choice in stressful times.

It Is A Flexible Option

The flexibility and ease that a short-term loan provides is unmatched.

These loans are designed to cater to your exact needs, in terms of the amount, repayment terms and timeline, and interest rates.

A short-term loan provides you with the flexibility for repayment. Many licensed money lenders allow you to choose the frequency with which you would prefer paying back the installment.

You can easily manage your repayments according to your financial situation, and choose weekly, bi-weekly, monthly, and payday repayments.

Lenient Credit Checks

The credit check for a short-term loan is usually less stringent.

Your credit score doesn’t need to be in perfect shape when you apply for a short-term loan from a licensed money lender, as most of them rely on your citizenship status and annual income for loan approvals.

They Are Highly Accessible

Getting a short-term loan is readily accessible, through licensed money lenders and banks across Singapore.

A short-term loan application can also be filled and submitted online, making it even easier and quicker to get your hands on a short-term loan.

But it must be noted that when dealing with licensed money lenders, it is important that you collect the loan amount after face-to-face verification, to go through the loan terms in detail, and to prevent fraud.

Cons

With all these benefits of a short-term loan, there are certain drawbacks to it as well. Some of them are:

They Incur Higher Interest Rates

While short-term loans are quick, easy and hassle-free, they also incur a higher interest rate than long-term loans, because they have a shorter loan period.

You may also need to pay a higher interest per month with a short-term loan, as compared to long-term loans.

They May Make The Borrower Complacent 

When you take out a loan, a healthy amount of worry is necessary to repay it on time.

But with short-term loans, borrowers often become complacent, thinking they can easily pay it back, but end up with a higher debt and interest than they started off with.

It has often been the case that the debtor ends up taking more loans to repay the previous ones. A borrower needs to have sound financial management to repay a short-term loan on time.

Alternatives To Short-Term Loans

Given these drawbacks, and the risk of running into a loan shark, some people would rather not take out a loan from a financial institution and look for other alternatives.

Some good alternatives to taking out a short-term loan are:

Borrowing From Loved Ones

Friends and family are a good source of financial assistance when you need some amount of money in an emergency.

It is a good idea to chalk out a formal agreement when you loan from a friend or family member to reduce misunderstandings.

Ask For Help From Your Community

A community resource may also be a good alternative to a bank or a licensed money lender. Similarly, you may even qualify for a government assistance programme.

Request For An Advance From Your Employer

You can also ask your employer to give you a payday advance if you are strapped for cash in an emergency situation.

Where To Apply For Short-Term Loans

If you have considered all the pros and cons of a short-term loan, and have decided to go ahead with it, then the best, most reliable sources for a short-term loan are:

Licensed Money Lenders

There are hundreds of licensed money lenders across Singapore, ready to serve you in your hour of need with quick and easy loans.

They are regulated by the Ministry of Law, and follow strict protocol and code of conduct to make it a smooth experience for the borrowers.

You can get as little as $500 to six times of your monthly income as unsecured loans, given your annual income and citizenship status in Singapore.

Licensed money lenders can charge a maximum interest rate of 4% each month.

Banks

Banks are also a more reliable way to secure short-term loans, with a lower interest rate, but they have stringent policies and a longer approval time, which may not be the ideal choice for you.

They also focus on your credit score, and a poor score may result in your loan application being rejected.

Private funders are another option, but they are exempted from holding a money lender’s licence, and are only allowed to lend money to accredited corporations and investors with considerable and defined financial assets.

Apply For A Short-Term Loan Today

To apply for a short-term loan, you need to submit your NRIC, Singpass and three months’ payslips along with your loan application.

Licensed money lenders can lend you cash as soon as within 24 hours, for which you need a face-to-face verification.

Conversely, banks may require more documents related to your credit score and income, and may take up anywhere from four to seven days for approval.

A short-term loan is a quick, highly accessible option that may help you in difficult financial situations. That said, it is best to evaluate your circumstances before you go ahead with your loan application.

GS Credit offers hassle-free short-term loans.

We are proud to offer low interest rates, quick loan approvals, and flexible repayment options.

Contact us today or apply for a loan now.

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