A short-term loan is a loan, the unique condition of which is the official term of up to one year, although in practice 1 (urgent or instant loans), max. 3 months (in 90% of cases it runs). Such installment loans or so-called private loans are available at short notice. The loan amount is usually between 300 USD to 60,000 USD. An important advantage is that the amount of the cost and the term of the loan are known to the borrower from the start.
Take out consumer loans at short notice
Short-term consumer loans – the phenomenon that is encountered in many large supermarkets and technology stores today. Short-term and microcredit are very interesting for private applicants, as they are helpful in the purchase of small items, household appliances, high-tech equipment, furniture, etc. (the loan when buying in installments). The buyer’s ownership only occurs when the last credit installment has been received.
In the case of low-value items, return or seizure with subsequent utilization is excluded. Short-term loans are sometimes the only way to be self-employed and open a small business, or to make your own dreams come true (e.g. to buy a motorcycle or a TV set).
In addition, the money can simply be “left alive” or used to pay municipal debts, for groceries, for a wedding, medical treatment / care, a funeral and other unscheduled events and events. Urgent loans are used to make urgent payments.
Interesting for companies
Short-term corporate loans present themselves as a way to briefly increase working capital to refinance existing commitments to other creditors. The variable interest rate (loan rollover) is missing. When applying for a short-term loan in the bank, all credit requirements should be met before the required amount is spent in cash.
In the case of internet banking, you can fill out the credit application as an online form and send it off immediately and secure a prompt, non-binding commitment from the bank. The basis for approval for receiving a short-term loan is the information provided by the borrower (including proof of wages and income). In 30 days after signing up, loan experts assess the borrower’s credit history, and then the decision comes – to approve or reject it.
In the case of an express loan, specialists should make a decision to grant a loan more quickly (from 1 to 15 days). At the moment there are even lenders who promise the required loan amount in the account within 5–10 minutes. The others offer the applicant a more realistic deadline of up to 24 hours.
If the credit history is “damaged”, many financial institutions will refuse to guarantee the loan, or will reduce the maximum loan amount almost to a minimum.
Credit card as a short term loan
An interesting and famous type of short-term credit is the open limit on the credit card (overdraft, overdraft, credit card credit). This function allows you to withdraw money in the ATM (with, the commission 1–5%) “in the minus” and to pay with the card if there is no positive balance. Sometimes there is a grace period (1-3 months) on this card if this ″ negative ″ balance does not earn interest.
The loan amount corresponds to a multiple monthly salary if no separate loan amount is required. A regular receipt of money should be available to cover the loan.
A short-term loan is considered to be “short-term borrowed money”. In the event of non-compliance with the contract terms, much higher costs than the agreed contract amount may be incurred. And of course the short-term small loans can be paid out early without any further financial obligations to the lender.
In any case, it is advisable to realistically assess your own options and select the cheapest financial options.
A quick loan is a classic installment loan. It is granted without a specified purpose like a car loan or a construction loan and therefore serves to fulfill the borrower’s very private wishes. Fast loans are usually granted by direct banks over the Internet. Quick credit advice, processing and payment is promised and usually adhered to.
The requirements for the payment of a short-term quick loan
The household bill
Before banks lend to their customers, banks check the creditworthiness of the future debtor. This check is carried out with internal guidelines and the indication of the potential customer. In order to be able to carry out this assessment, the banks need information on monthly income and on existing liabilities. as well as the customer’s monthly expenses such as rent, utilities and living expenses. All of this data results in the customer’s household bill.
This calculation shows the budget surplus that can be used to calculate the rate.
Without income there is no loan
Labor income from permanent employment, pensions, pensions and child benefits are considered regular income and must be proven with the submission of payslips, proof of salary and pension notices.
In the case of the self-employed, the balance sheets, business evaluations or the tax assessment are accepted as evidence.
The Credit bureau exam
If the budget statement shows a positive value, the banks query the creditworthiness of Credit bureau. It is stored here whether liabilities already exist and whether they are serviced in accordance with the contract. No credit will be approved for negative entries.
The borrower must be 18 years old.
Sample invoice for a quick loan without Credit bureau
The following invoice can be drawn up for a loan:
- Total loan amount (net loan amount): USD 3,500.00
- 3% brokerage fee: USD 105.00 or processing fee
- Interest for the agreed term: USD 603.00
- Total: USD 4,208.00
- APR: 11.15%
- Borrowing rate annually: 8.87% committed for the entire term
Example calculation for a loan with Credit bureau:
- Borrowing rate: from 4.25% (depending on credit rating) fixed for the entire term
- APR: 4.87 – 15.69%
- Net loan amount: USD 2,000 to USD 50,000
- Total: USD 4,208.00
- Contract duration: 12-84 months
As you can see, a loan with a Credit bureau query is always cheaper than the one without a Credit bureau query
What types of quick loans are there?
The normal installment loan
The name installment loan is derived from the fixed repayment of the loan, which is made in constant monthly installments. The amount of the installments to be paid depends on the term chosen by the borrower when the loan is agreed. The banks offer their installment loans from 500 USD, the maximum loan amount can be 50,000 USD. The repayment is usually made in 12 to 84 monthly installments, with some banks the repayment is granted in up to 120 months.
Each borrower can decide for himself about the loan term. By extending the term, the rate is often reduced.
The cost of an installment loan is at interest of 3.9 – 12.9% pa and depends on the amount and the term of the loan. The institutes often calculate their interest based on their creditworthiness. Customers with a good credit rating get cheaper interest than customers with an average credit rating.
In addition, transaction or processing fees apply. These amount to between one and three percent of the loan amount. The APR shows the actual cost of a loan.
Mortgage loan is a form of quick loan!
A credit line is an agreed credit line that is set up on the current account or an extra account. This loan is not paid out in one sum, but is used by the customer if necessary. This gives the customer more room for maneuver. The credit can be used at any time. When the loan has been repaid, it can be drawn again. The interest on a mortgage loan is usually higher than a normal installment loan.
What are possible pitfalls
A quick loan involves few risks. If there is no mistake when applying, or the financial situation deteriorates significantly, there is no difficulty in paying a loan.
A risk is an illness, unemployment or a personal stroke of fate. Therefore, it is important to still have some leeway despite paying in installments and, if necessary, to repay the loan early.
What to do if you have bad credit rating?
If the credit rating is not the best, you can switch to the expensive Credit bureau-free loan. There is no Credit bureau query or notification to Credit bureau for these loans, and the amount granted is also limited.
For loans without Credit bureau, customers pay significantly higher interest rates than for a normal quick loan. In this way, providers secure themselves against possible credit default. Often, the interest for a Credit bureau-free loan even exceeds the expensive overdraft interest. In addition, consumers cannot freely decide on the loan amount and the duration of these loans. Loans without a Credit bureau are usually granted up to a maximum of 5,000 USD.
Current figures and interest rate developments
Currently there is the quick loan from 0.00% interest up to a double-digit range if the credit rating is not so good. The credit without Credit bureau is in the double-digit range and depends on the foreign bank that issues it. The request for a normal quick loan is usually worthwhile. Credit bureau or another scoring company is often better than you think and you save money as a consumer.