Financial institutions, such as banks and credit unions, offer short term personal loans for those in need of immediate cash. Quick cash, however, often comes at a price. Short term personal loans generally have a low maximum amount – from $500 to $35,000 – along with a short repayment term and high interest rates.
By: Phoenix Lee/
It is important to understand the different short term personal loans as they fit different purposes.
Emergency Cash Loan
An emergency cash loan is offered to those needing instant cash. Borrowers can use an emergency cash loan to cover such immediate expenses as medical bills, home or car repairs, or other unforeseen costs. If your bank is unwilling to help you, consider contacting a licensed moneylender. Licensed moneylenders generally have less strict lending policies than traditional banks.
If you are considering an emergency cash loan, but you have poor credit, a payday loan may be your best (and only) short term personal loans option. These loans have much higher interest rates and fees than other short term personal loans, and therefore should only be considered in extreme situations. Many times, payday loans can make financial problems worse. To be eligible for a payday loan, you simply have to show proof of employment – for example, a pay slip.
For example, if your payday loan is for $800, you may have to pay $200 in fees alone. With some payday loans, borrowers pay over 400% Annual Percentage Rate (APR). While this type of loan is better than borrowing from loan sharks, use caution when applying for one.
Line of Credit
A line of credit is another type of short term personal loan that is a great way to tackle cash flow issues. One benefit of a line of credit over most other short term personal loans is that banks do not charge interest for the part that you don’t use.
For example, if you have a credit line of $30,000, but you’re only using $15,000, you’ll only pay interest on what you use ($15,000). Borrowers can continue to take out as much as they need, as long as they don’t exceed the maximum amount of the credit line.
A bridge loan can help you when you need extra finances. For example, if you buy a new house but your old house is still on the market and has yet to sell, you may need a bridge loan to help cover both mortgages. Generally, borrowers must put up some type of collateral (e.g. their for-sale home) to back a bridge loan.
Though bridge loans have greater fees and interest rates than home equity loans and other short term personal loans, they are a good option for many homebuyers who can’t hold off on buying a new home or selling an existing one.
Home Equity Loan
A home equity loan is also called cash-out refinancing, or a second mortgage (but for marketing reasons, banks really hate the word “mortgage”, so you’ll rarely hear them say that).
A home equity lets you borrow money, while using your house as collateral. Home equity loan is helpful as a short term personal loans option if you have run out of cash but have a valuable house. So without resorting to the usual choice of selling your house, you may opt for home equity loan. A home equity loan lets you get money out of your house, without having to lose it.
There are plenty of advantages: when your house is the collateral, the bank feels a lot more secure; they know you can’t exactly pack up your house and run away with it. Because there’s something they can foreclose on, banks consider home equity loans to be low-risk, secured loans.
That means they charge a super-low interest rate, seldom above 1.3 per cent per annum. For reference, that’s less than a third of your CPF Ordinary Account rate (up to 3.5 per cent per annum), and about 1/6th of a personal loan rate (about six per cent per annum).
That super-low interest rate means home equity loans are quite cheap, and can provide a much bigger loan than you’d get through, say, a personal instalment loan. Most other, short term personal loans options can only lend you up to four times your monthly salary. So, if you have no income because you are retired or unemployed, but have a valuable private residential property and have a financial crunch – home equity loan may be the best option for you.
How to Secure Personal Loans Quickly
If you are in a financial crunch and are searching if personal loans useful to expand your business, the loan consultants at iCompareLoan can set you up on a path that can get you a it in a quick and seamless manner. Our loan consultants have close links with the best lenders in town and can help you compare various loans and settle for a package that best suits your needs. Find out money saving tips here.
If you are looking for a new home loan or to refinance, our Mortgage brokers can help you get everything right from calculating mortgage repayment, comparing interest rates all through to securing the best home loans in Singapore. And the good thing is that all our services are free of charge. So it’s all worth it to secure a loan through us for your business expansion needs.
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