Factors to Put Into Consideration When Going for a Short Term Loan
Business owners face uncertain times and need to get some funds to reinvest in their business for a return to keep them going in business. Short term loan facility is ideal for any business owner who is looking to have their businesses funded and want to repay the loan within the shortest time possible not exceeding one year. Short term loan can be defined as the amount of money that is borrowed to repay the money in 3 to 12 months period. There are several points that you need to look at when borrowing a short term loan. Below are some of the key factors to look at when applying for a short term loan.
You need to understand which type of loan the lending institution is going to offer. When it comes to short terms you have two options to go for either the secured one or unsecured type. Secured loans are where the business owner is required to have an asset which will act as security for the money that he or she is going to borrow and this allows them to borrow the funds with a low-interest repayment rate. While the unsecured loan doesn’t need any pledge, you’ll be required to provide bank statements, business records as proof of the business as well as your residential address, however, you will be charged a higher interest than the secured one.
What is the cost of borrowing the short term loan? You should consider knowing the cost of borrowing the short term loans from different lending organizations before settling for any lender, this will give you the best repayment interest rate. The amount of money that you are likely to be charged as the interest rate will be determined by your credit history, poor credit history will lead to a higher charge rate on the interest.
Consider looking at the terms of the loan. While you are looking for a loan to pay within one year and at a lower interest rate, different lending organizations will have varying terms of their loans which can easily be compared by checking on their different EMI.
Lastly, you need to understand your loan repayment plans. Before you decide to borrow a short term loan, you should have a plan on how you are going to pay back the loan within the one-year failure to which it may result in a more financial crisis. You need to figure out the amount of EMI that you required to pay and also have the necessary plans set to ensure you will have a smooth repayment period.