A short-term loan is designed to be able to pay unpaid expenses at short notice. It can be used for an expensive car repair or for the purchase of a new washing machine if the old machine goes on strike. A special feature of short-term loans is the extremely short term, which is usually 30 days.
In addition, the loan amount is quite low and usually moves below 1000 USD. When looking for a short-term loan, it is worth using a loan comparison calculator to find the best deals. Because there are a large number of providers who now offer such a loan.
Short-term credit and its differences from the classic installment loan
A very striking difference between a short-term loan and a classic installment loan is the amounts and terms to be borrowed. Where an installment loan has a four- or five-digit loan amount and the term is at least 12 months, there is only one loan amount for a short-term loan in the two- to three-digit range. Short-term loans are less lucrative for a traditional bank because the administrative effort is too high.
Therefore, this product is only offered by direct banks or credit intermediaries. The conclusion of a short-term loan contract is very easy, since the loan calculator on the Internet not only compares the different offers, but also provides the necessary forms for the provider to apply for the loan. A short-term loan offers both advantages and disadvantages that should be carefully considered. Here is a brief overview:
- Uncomplicated application
- Fast processing and quick payment
- Payment possible with express transfer
- Credit approval also possible with a poor Credit Bureau score
- High annual interest rates similar to those for overdraft facilities
- Additional costs for express transfer as well as for longer and shorter terms than 30 days
Short-term loan vs. Overdraft facility
A short-term loan is definitely worth it if the borrowed amount can be repaid on time, even if the differences in interest rates are very small. Because the interest for a short-term loan can be calculated to the last cent. If the loan repayment does not work, additional costs are incurred in the form of reminder fees.
There are no overdue fees when using the overdraft facility. However, the minus on the checking account pays interest every month, which can quickly result in substantial amounts. Therefore, a manageable short-term loan should be the first choice if a manageable, financial bottleneck has to be bridged in the short term. The short-term loan can be triggered with the next wage payment.