Are you in a financial jam? Need access to cash quickly? Urgently need money for a medical bill? A short-term loan can help you in these situations. As a part of employee financial wellness program, the short-term loan is designed to assist you when you can’t wait until payday and requires cash fast.
But before you apply for a short-term loan, it is vital for you to know how they work, and interest rates associated with it.
Warning associates with Short Term Loan?
Short term loans can be an expensive, as APR is much higher for it than other financing options. So, before you apply for the short term loan, just give a thought that you require it or not. Also, many short-term loans have the overdraft and hidden fees. Check it too.
If it is tough for you to pay your bills, your debt is If you are struggling to pay bills, and your debt is crutching up, then communicate this to your utility providers. They can probably help you out with a payment plan.
How does the Short-Term Loan work?
Usually, short-term loans range in between $100 to $2,000. On average it has around a two-week term. The short-term loan is also called “payday” loans, as the terms and amounts are coordinated to your income and how often you are paid by your employer or place of employment.
Short term loans do not help in building or increasing your credit score. If you want to do so, it is advisable for you to explore another financing option like credit card and personal loans with standard banks.
What is the interest rate on Short Term Loan?
As we discussed earlier, the APR for short-term loans is much higher when compared to any other financing options. On average, it has an APR of around 400%. While on the other side the APR for other financing options like Credit Cards and personal loans with standard banks is much lower. For instance, the national average APR for credit cards is around 15%.
My Short Term Loan interest rate and other fees come with it?
Your interest rate depends on how much and for how long you’re borrowing, while short-term loan fees vary by lender and state. In general, they charge a fixed-fee based on the amount borrowed. The lender will usually provide you with monthly and annual fees options, and for late payments or defaults on loan, you could be charged some additional fees. Timely payment is significant as in the case of non-payment, the lender can sue you to court.
A short-term loan is the best option for you if you are using single short-term lender and sure that you can afford to pay the interest.