If you are facing the need of taking a loan, but you have a bad credit score, then you are following the right blog. Don’t worry; you still have opportunities to maximize your chance of obtaining loans. The facility of getting short term loans for bad credit / really bad credit short term loans has eased out this stress to a broader level.
Many people get dejected when their loan request is rejected the first time, and they don’t bother to even investigate the reports but assume that it is because of their bad credit score. A credit report is the first that a person should check when they want to apply for any loan. This will help them in understanding their track record and would help in taking all requisite corrective measures.
For start-ups and small-scale businesses, a short term loan is a valuable option until they get eligible for a good line of credit from the banks. The amount usually borrowed in a short term loan is much lesser as compared to traditional loans, and ranges between some hundred to thousand dollars.
Can I get short term loans for bad credit?
As the name suggests, these are short duration loans that are usually taken for a period of one to two years. They are helpful, especially when a person is unable to get a loan from a bank, and thus can meet his immediate cash requirements.
People with bad credit do not have access to overdrafts or credit cards. Short term loans act as a blessing in such conditions because the approval process is short and proceeds at a faster pace. People can get money quickly for a quick need. A bad credit score definitely cannot get you all kinds of loans possible, but short term lenders consider your application on goodwill even if you have poor credit. You don’t need to give any collateral as security to get these loans.
Types of short term loans
- Payday loans
When you borrow a payday loan, you have to pay it back by the time you get your next paycheck. The costs associated with this loan are very high as the interest rates are relatively very high. For repayment of these loans, either you can give a post-dated cheque or an Automatic Clearing House authorisation to the lender. This is because the entire amount has to be paid back together along with interest and not in instalments.
Payday loans are small value loans ranging from $100 to $1000, but the amount that can be given differs from state to state. They can be taken from small stores, banks or online lenders by paying a small one time fee that has to be paid at every renewal. If you can show a steady monthly income and have a running checking account, then that is all you need.
Individuals usually take Payday for managing daily utility expenses. People using payday loans enjoy them because they get instant cash, overlooking the high-loss in the form of interest and fees.
- Business Credit
Business credit is often carried between a buyer and a vendor where the vendor offers credit days so that you can pay for the purchased goods. It essentially means that a seller is lending to a buyer for a short term. The number of days for credit can be anywhere between 21 to 60 days, and this has to be mutually decided between the buyer and the seller. This number decided for the credit is very important because as a merchant, the lesser the credit given to the buyer, faster is the rotation of the invested capital.
- Credit Card
A credit card works as the best kind of loan when you can repay it in just a few weeks, and you do not wish to keep paying interest to the lender for months or years. In a credit card, instead of taking an upfront credit of cash in your account, you instead make the lender finance your spends by paying directly to the merchant. The lender then usually gives you a month to pay back this money, and if you do that in time, then you would end up paying no interest at all. All you need to be careful about is that you don’t miss out on the last payment date, and clear your dues in time.
- Mercantile Cash Advance
A Mercantile cash advance is a loan given by a lender to a merchant, and the merchant then provides the lender with consent to use his credit facility and collect the money back. A fixed proportion of the merchant’s sale proceeds are given to the lender till the entire amount is collected.
Short-term loans can be a good choice for small projects, but one should not use them for long term projects because the high-interest rates when compounded over a long term, can adversely affect the projected costs of the project, and thereby affect the profitability. It is also essential to understand all the rules and guidelines associated with the loan before taking it from the lender.
Moreover, short term loans can be used as a tool to improve your credit score by paying them back on time. This, in turn, would increase the probability of you getting a long term loan at lower interest rates.