We all have times when there is too much month left at the end of the money. When you have an emergency expense or run out of money for bills, then short term financing may be the answer for you.
Unlike a traditional loan or financing, it doesn’t take years to pay back and is designed to hold you over until you have more money such as a payday.
We can never know what life will throw at us, but when you need a small amount of money right away, then a small loan to get you over the hump a short term finance company gets you the help you need.
What is Short Term Financing?
There are many types of short term financing from loans from lenders, family, or another method that is for $1,000 or lower. The goal isn’t to finance something large such as a car or a home, but to provide the finances for an emergency such as a car repair or medical bill.
People who live paycheck to paycheck may not have financial reserves to tackle such expenses, but a short term loan gives them the ability but must be paid back quickly. The payment periods can be anywhere from a few weeks to a few months, but generally not over a year.
It is not designed to replace a paycheck, but to provide emergency funds when you need them.
Short Term Vs. Long Term Financing
Long term financing usually involves a major expense such as a car, home, remodeling, vacation, etc. It’s for a large sum of money that could be in the hundreds of thousands of dollars or more and designed to be paid back over a period of years.
A home loan could be 15-30 years and a car loan is usually for 4-5 years. A short term loan has a higher interest rate since it’s being paid off quickly. This allows the loan company to get more profit from interest.
Long term loans have much lower interest rates since their profits come in over a long period. For instance, the average car loan interest rate on new cars is 4.33%, whereas the interest rates for short term loans average 8–13%.
Fix and Flip Loans
Another type of short term financing that can be for a large amount of money, but for a shorter payback period is fix and flip loans. People use the loan to purchase and run-down home and fix it up. They then sell it fast for a significant profit so they can pay off the loan and still have profit left over.
The real estate market can be fierce this allows people to compete with investors that use cash instead of loans. The requirements for one of these loans are similar to a standard loan, but the payback time is significantly shorter.
Use Short Term Loans Wisely
Short term financing can be a major boon to people who need money fast but without the hassle of paying it back over years. Whether it is for emergency funds or to flip a house, these loans are ideal.
If you want to learn more about this type of financing, then please explore our site.