Short-term loan is a popular service of banks, which is very popular among both legal entities and individuals. This is a simple solution to the money problem that everyone can have. Moreover, most banks issue such loans on fairly favorable terms, so that the amount of overpayment for using them does not seem large.
Understanding the concept of "short-term loans"
A short-term loan is a loan that is issued for a period of one year.
You can get short-term bank loans by submitting a minimum package of documents, and such an application will also be considered fairly quickly. Since this is a common type of lending, and loan amounts are relatively small, they process it very quickly. Another plus is that the bank will not charge interest for its early repayment.
Only those bank customers whose credit history is not spoiled by constant delays in making payment amounts, that is, those who have a great history, can receive such financial assistance.
Why do banks set rather high interest rates on short-term loans?
You have the right to independently decide what interests you more - a short-term loan or a long-term one. For all lenders, the rate on short-term loans is significantly higher than the rate on those issued for a longer period.
Lenders justify themselves by the fact that long-term and short-term loans have different levels of risk, because when applying for a small loan for a short period, the bank or other lender does not require a full package of documents, “trusting customers with a word” about their responsibility and honesty, that is, careful selection. And the requirements for such customers are low. Therefore, a lender who exposes himself to a fairly serious risk puts a higher interest rate. To somehow protect their interests.
Types of short-term loans and their differences
Today, there are a large number of different types of short-term loans, but the most popular and sought-after of them are:
Overdraft. A type of short-term lending that is quite common and in demand both in our country and abroad, which is mandatory drawn up by a specialized agreement. A legal entity or an individual who has received an overdraft has the opportunity, within the limit, which is determined individually, to “go to minuses,” that is, use the funds provided. The interest rate is quite low, and with regular replenishment of the account, interest will be repaid automatically.
Only legal entities can apply short-term loan secured by working capital. With its help, many market participants solve their temporary financial difficulties without particularly high costs for paying interest on the use of this type of debt.
Credit card. This is the most common type of lending in the modern world. Depending on the reliability and responsible attitude of the client to paying off debts, a limit is drawn up for him, which can be used if necessary. A good credit history and timely repayment of interest is the easiest and surest way to increase the size of such a financial source.
Why is it much more profitable to borrow from banks?
Today, many firms and organizations are ready to offer their financial assistance in the form of loans, which are especially well known as “money to pay” or “advance to salary”. Experts recommend making a decision on issuing such a loan only in the most hopeless situations.
Indeed, the interest for their use by the organization is set quite high, despite the fact that the time of use of this money has approximate boundaries of one month. The interest on short-term loans, which were issued in a reliable bank, is several times lower, that is, banks are still more loyal to the client.
Why is it beneficial to have a credit card in my wallet?
Many scientists are inclined to believe that in the near future, cash payments will become a relic of the past, because today most of them have already switched to electronic format. Electronic money is calculated not only during serious money transactions, but also each of us in everyday life, using a credit card at the cash desk of any store. This is convenient, profitable, allows you to control expense items and see what the largest part of the budget is spent on. In addition, this way you protect yourself from the possible loss of money, in addition, many lenders develop special discount systems for using electronic funds to pay for goods or services.
Display of short-term loans in the reporting company
Today, all legal entities operate only due to the presence of long-term and short-term loans, since the own funds of an enterprise or organization are simply not enough to maintain a normal level of production, output, and ensure timely settlements with the budget and counterparties. Short-term loans in the balance sheet of the company is a type of liquid funds that characterize the company as a solvent economic unit.
Accounting for short-term loans should be carried out in accordance with all the standards of the legislative framework, this will allow the legal entity to repay debts on time, not to spoil its credit history and, most importantly, to correctly report. An enterprise or organization that regularly returns a short-term loan to its lender will always be interesting to a potential investor.
What happens when a loan has not been repaid on time?
For a minor delay in repayment of loans, in most cases a symbolic penalty will be calculated, which will also need to be repaid. In the event of a subsequent refusal to pay the sum of interest and penalties, the creditor has the full right to judicially demand all payments. But more often than not, a short-term loan is paid out of time due to customer forgetfulness; therefore, a reminder from the bank is enough to get it repaid urgently. To collect property for an unpaid loan have the right only after an appropriate decision of the court, and if it was provided for in a previously signed agreement.
Never hide from paying a loan!
The most incorrect decision that can be made in the event of arrears in payment is to try to hide from a bank or other lender. Today, even under the most unfavorable financial conditions and the inability to pay off debts, you can instantly agree on a change in the settlement scheme, because most credit agreements provide for this.
But in order not to fall into such a situation, you need to think several times before applying for a loan, whether you can pay off all the debt on time and whether there is a need for these funds or you can still do without them. After all, a bad credit history in the future will be very difficult to fix and regain confidence.
