Short Term Loans
As anyone in business will tell you, short term loans can be powerful tools, especially if it can be utilized to give you increased leverage in a transaction that will be useful to you or your business.
A good example is finding an advantageous price on a purchase. What if you could buy a two-year old Mercedes SL for $5000? Perhaps it is part of an estate sale, or it is being auctioned off by a municipal police department. You don’t have the cash now, but what if you did?
These kinds of transactions take place every day all over the world. The business community calls it “commercial paper.” The stock market calls it margin. It doesn’t matter what the name is. You can use it to give yourself an advantage.
What Kind of Loan?
What if you could borrow that five thousand dollars for three months? That would be about enough time to conduct your transaction, collect and get your loan paid off. It really wouldn’t matter all that much what your interest rate is provided you have a use for those funds lined up that makes financial sense.
Many short term loans are issued with higher than normal interest rates. The service being provided is less the money itself and more the liquidity needed to perform the task you have identified, so there is very often a higher-than-normal interest rate involved. The key to making sure that interest rate works for you is to factor in the entire cost of the money involved and compare it to your purpose.
Keeping your costs down should be a priority for you, as it will in some cases dramatically reduce the interest rate and may also reduce some of your fees. The more you can minimize the risk for the lender, the more favorably they will treat you when it comes to a loan application.
You should consider putting up collateral of some kind if you can. A secured loan is far easier to qualify for than a signature loan. Use collateral that you wouldn’t otherwise “cash in” like securities or certificates of deposit. Remember the goal is to pay back the loan in the short term, so there should be no issue with your lender foreclosing on your collateral.
When you borrow, make absolutely sure you know exactly how and when payment is expected. Also be certain paying on your own schedule is not going to increase your costs. Some lenders may expect you to keep the money for the full term of the loan in order to maximize the interest do. Others won’t. This should be a primary concern for you as “early payment” may trigger penalties and cause problems that may prevent you from borrowing again in the future.
Remember, everything is negotiable. If there are standard pre-payment penalties, request they be waived. If you can demonstrate you are a good customer, the lender may forego this loan’s fees in order to obtain future business.
The main thing to remember is a short term loan is a liquidity service. It’s not meant to be a “let’s have fun” credit card. These are funds that will need to be paid back as quickly as possible, so make certain you are using the loan for the right reasons.