Loans given for short terms are money that are given by microcredit organizations, banks, pawn shops for a period of up to a period within one year. More often, this type serves the capital circulation and different things important for clients, like buying goods, getting a good medical treatment, urgent repairs etc.). The most common in South Africa are short term loans for 6 months or less.
Loans of such type could (or could not) be obtained on the security of real estate, a car, house or other material things that are in possession of debtors.
First, short-period borrowings are different to conventional financing in the way of a short repayment period. Second, the amount of required documents is not that huge, and what’s more – a lender will more likely approve such an application without documentary evidence of income level.
Also, short loans are provided to clients with an additional increase to extra fees. Besides, an application process is held to a more straightforward scheme. So it rarely takes more than half an hour for a positive decision.
This type of loan has a serious disadvantage. By giving money for a loan, the lender takes risks of losing money, so these potential losses are retranslated on the shoulders of clients, in form of higher interest rates, shorter terms etc.
Terms and conditions of short-term loans
In the majority of cases MFIs put forward common set of requirements for applicants for a short term loan:
- age from 18 to 80 years.
- South African citizenship.
- full legal capacity.
- residence permits in the country.
- source of stable income.
To obtain short term loans online, you should provide a work email and currently available phone number.
Speaking about papers, passport details (which are filled during the application form filling process) are also required (you should give a scan of the document). Sometimes, companies may also ask you for another identity authentication, meaning pension certificate, passport, medical policy, military ID, etc.
Quick loans for a short period are usually free to obtain. But in this case the terms are calculated not in months, but in weeks or days. The same goes for short term loans with no credit checks.
Advantages and disadvantages
This particular type of loan has got both advantages and disadvantages. Let’s start with positive features:
- Fast decision-making – between 10 minutes and 3 days.
- Possibility to get money with a troubled credit history (or even without at all), as there are short term loans for bad credit scores.
- Chance to borrow money even for those social categories which are most commonly closer to being rejected, like students, unemployed.
- Minimal pack of papers. As a rule, a passport or passport data is enough (for online short term loans).
Also there are some negative moments:
- High interest rate (especially for short term loans for low credit score).
- Small loan amount.
- Short loan term.
Quick short-term loans are considered a financial instrument with a high profit for lenders and a chance to get money in times of urgent needs for debtors. However, to make your co-work with MFIs as beneficial as possible, you are required to figure out your capabilities and apply for as much money as you need. For every thousand rubles taken “in reserve”, you will have to pay – remember this.
In case you are in need of money for a short period, you can use the credit products of banks. At the same time, the annual percentage here will be several times less; as a result, overpayments will be avoided.
Different forms of short-term loans
Let’s take a look at main types of short-term loans.
Overdraft is a type of lending that allows you to purchase the necessary item even if the payment instrument is negative.
Very rarely, but there is an overdraft, given to usual credit cards. This type gives an opportunity to buy needed goods within the sum of predetermined credit lines.
Let’s point out some other overdraft features:
- short term – (usually not more than 2-3 months;
- strict sum limitation – limit cannot be more than the user’s income for more than twice;
- repayment in one payment;
- higher rates, if compared to other types of loans.
As for the advantages of overdraft, we can highlight:
- automatic repayment operations, when money of monthly predetermined payments are taken off from borrower accounts;
- a small overpayment;
- there is no need to issue any additional card;
- The overdraft credit is approved once after the first application, but then after repayment can be used multiple times over again.
A credit sum is given by the company to the debtor within the pre-arranged limit, which is strictly stated in terms of the agreement.
This type of loan has got its own peculiarities:
- in comparison with other payment products, it is probably one of the most expensive;
- funds for transactions are given without additional repayment security in form of collateral;
- money is possible to spend at your own needs;
- one can repay a loan in one or multiple payments);
- operations are held strictly according to the agreement.
A lot of cards are provided with a special grace period, which is from 1 to 2 months on average. That means that within this certain period you are not to pay interest rates, so a given sum is available for free.