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How does a loan work? 5 things to know about short-term loans

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Even if you’re on top of your finances, there are times when you may need to borrow money, short-term loans. You may be keeping yourself out of debt and managing just fine, and then your car breaks down, and you end up with a large bill to settle. 

While you can borrow from friends and family, you may not feel comfortable doing this. Because you never know what life is going to throw at you, there are always short term loans that you can take out to help you. 

Short term loans are an unsecured loan that is available to anyone who has a regular source of income. But how does a loan work, and what are payday loans?

In this article, we’ll let you know five things you need to know about short term loans. 

How Does a Loan Work?

With a traditional personal loan, you’ll borrow money and pay it back over several years. With a short term loan, you’ll repay the debt in anything from a couple of weeks up to a year. The type of short-term loans that you’ll be eligible for will depend on your credit score. 

The loan works following this process:

  • You’ll apply for your loan either online or in-person
  • The lender will review your credit score and pay stubs
  • You’ll get an answer back quite quickly
  • You’ll receive the loan generally within 24 hours of your application

Once you get the loan, you’ll need to repay the loan within the agreed time. 

1. You’ll Need to Know Why You Need the Loan

Before you apply for the loan, make sure that you actually need to borrow money. There may be another way around the problem. If you can wait for the money, saving maybe a better option. 

When applying for the loan, the lender may ask you what the loan is for. Make sure you have an answer. 

2. Decide How Much You Can Afford to Repay

Do the math before you apply. Work out the maximum amount you can repay each week or month and only take out a loan that you can afford to repay. 

3. You Need to Know Your Credit Score

Your credit score will affect your interest rate and the type of loan that you can get. You can do an online check before to make sure you’re creditworthy. Poor credit will mean you end up repaying more. 

4. Read the Small Print 

What is the APR on the loan? What happens if you don’t make a payment? All of this information is essential.

Find out the terms and conditions before you agree to take the loan. 

5. Check Out the Lender First 

Are you borrowing from a fair lender? Is the lender known for excellent customer service? A review from bonsaifinance.com may give you insight into the lender. 

Short Term Loans to Help You Out

Taking out a short term loan is a big financial step, and it shouldn’t be taken lightly. That said, a short term loan can be beneficial. 

Do your research and make sure you understand how does a loan work. Read the small print and make sure you can afford to make the repayments. 

For more great articles, mtltimes.ca and totimes.ca

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