Although many people know what a loan is, not all know the difference between short term loans and long term loans
. But what really is a short term loan? A short term loan is a type of loan offered by different lenders which is due within a short period of time. This type of loan is usually unsecured and has a high interest rate. But a lot of people would still avail of a short term loan especially when they are in great need of money. Even bank lend short term loans. We all know that when we apply for a loan in the bank, they will usually ask for collateral before they approve your loan application. But if you are just loaning a small amount, they will no longer ask for collateral. Bank's short term loans maturity due can last from one up to three years depending on the amount of money borrowed.
Not all people are rich and so there will really come a time when we need to borrow money either from private individuals or other lending institutions like banks. Most people would have short term loans which are due for a short period of time compared with the long term loans. These loans are used by people for various reasons. Some people would avail of short term loans for emergency purposes. Some would loan for their businesses. But for whatever reason they may have, it is important to take note of the maturity date of the loan and make sure to pay it back including the interest. The period of time for the loan to mature varies some short term loans have 90 days maturity and some can last for even a year. It would also depend on the amount borrowed. In some banks, the maturity of loans can last up until three years.
Many people avail of short term loans even if these loans charge unreasonable high interest rates. But what are the reasons as to why people still apply for short term loans? One benefit of applying for a short term loan is that you do not have to undergo a long process of loan application unlike those applying for long term loans. This type of loan is suitable for people who immediately need money and they do not have any cash on hand. For as long s you have the ability to pay, you can avail of short term loans being offered by lending institutions like the bank or other private entities or individuals. Another benefit of short term loans is that for as long as you have the financial means to pay the loan, you loan application is easily approved unlike long term loans where your application is really being scrutinized.