Different types of short term loans
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Different types of short term loans
Short term loans are offered for short repayment cycles. Short term loans are easy to get because the amounts involved are typically small. It is, therefore, possible of one to take more than one short-term loan at a go depending on the purpose they want to use them for. There are many different types of short term loans ->
With typical installment loans, customers of a bank are loaned a certain amount of money as short term loans. They have to make periodic repayments until the loan amount including interest has been repaid in full. Automatic payroll deduction is used for employed customers whereby the deducted pay is applied into the loan account to pay off the balance. Once the balance has been repaid in full, automatic payroll deduction is stopped, the loan account is closed and the relationship between the customer and the financial institution ends unless the customer decides to refinance the loan.
When to use installment loans
Installment loans are used when one wants to pay for a car, home or part of college fees. There are also installment loans such as home equity loans that can be used for home maintenance and repairs.
Title loans are considered as one of the fastest growing credit products. They are high-interest, secured, customer loans in which the customer uses his or her car as collateral for a non-purchase money loan. These loans are made with a focus on the car’s equity. If a customer does not have enough money to make payments stipulated for the loan which is typically interest only, the lender can repossess the vehicle at any time. These vehicles are installed with GPS trackers so that they can be found easily.
When to use title loans
Title loans are used by people who are looking for a fast and easy way to get money using the title of their vehicle instead of their credit score.
Loan consolidation allows customers to combine multiple short-term loans into a single loan at no cost. Customers need to confirm the various loans they want to be consolidated and agree with the particular financial institution on the amount that will be repaid on a monthly basis. This will lead to a reduction of interest rates and customers will repay the short term loans within the duration of time that will not cause them financial stress.
When to use loan consolidation
Loan consolidation is used by customers who do not want to make several payments to different lenders rather to one particular loan provider who will then clear their debts.
Payday loans are considered as short-term loans that are paid directly into one’s bank account and are meant to help people deal with pressing financial issues as they await their payday. The loan should be repaid with the stipulated interest as soon as the paycheck is processed although some lenders may give you the freedom to choose your payment period. People eligible to receive this kind of loan ought to have records of payroll and employment.
When to use payday loans
Payday loans are used by people who have financial crises that need immediate attention.
Bank overdraft can be defined as an extension of credit whereby the fees charged on customers’ transactions are covered by financial institutions because the customers’ checking account lacks sufficient funds. There is usually an agreed amount of interest to be paid back when the customer receives any funds in their account.
When to use bank overdraft
Bank overdrafts are used when a customer wants an intentional loan, when there is an ATM overdraft and when he or she fails to maintain an accurate account register.
Secured loan from the bank
Secured loans from the bank are those secured against the value of a customer’s property and are secure in respect to the lender. This loan is secured on customers’ homes and if they fail to repay it, they can be forced to sell their homes to clear the debt. Lenders will take the value of the customer’s home into consideration and their personal credit history before they decide whether or not to give them the loan.
When to use secured loan from the bank
A secured loan from the bank is used by customers who have homes of high value which can enable them to get loans for achieving a certain goal.
Short term loans are essential because they enable people to gauge their ability to pay loans. If one is able to pay a short term loan without constraints, it will be easier for him or her to manage and repay a bigger loan.