Are you considering applying for a short-term loan to accommodate your daily expenditure? Are you on the move to apply for a short-term loan and you need assistance? The following article covers the basics of how to apply for a short-term loan—along with other things that you should know to avail a short-term loan effectively:
It is no surprise that one of the drawbacks of applying for a short-term loan is that not many applicants are able to find a lender on a short notice. People apply for a short-term loan to acquire cash for facilitating their day-to-day activities until they receive their next paycheck.
In other terms, a short-term loan refers to a small amount of loan that is paid back over a short span of time. Usually, lenders in South Africa lend from R100 to R10 000 to the applicants for short-term purposes. If you are considering applying for a short-term loan then, you should familiarize yourself with the following concepts:
Benefits of Taking a Short-Term Loan:
- Short-term loans are easy to process and they have a quick funding time process
- Applicants with a low credit scoring can apply for a short-term loan without any hassles
- Applicants are required to complete the application process with minimal requirements
Understand the Objective of the Loan
Before you apply for a loan, you should ask yourself “why am I applying for a short-term loan?”, “How much money should I expect from my short-term loan”, or “what should I do before applying for a short-term loan”. Understanding the purpose of a loan is a crucial part of any loan application process, and your lender would inquire your intention to apply for the loan. Applying for a short-term loan comes with a criteria, and you should make sure that you meet the requirements for a short-term loan before you proceed further with the application process.
Short-term loans are not usable for long-term purposes; for instance, you can use them to facilitate your daily operations but, you cannot expect to pay your car’s monthly installments with the borrowed money.
Be Familiar with the Amount That You Can Pay back on a Monthly Basis
With a regular short-term loan, you can keep the borrowed amount until you receive your next paycheck. However, if you are unable to pay back the amount then, you should explain the situation to your lender. Once you have specified the amount to borrow, you should be familiar with the amount that you would be required to pay back on a monthly basis.
Once you have learned that how much you should afford to pay back to your lender; you should proceed further to specify the exact time duration to return the amount back to the lender. For instance, if you were to borrow R2000 for 3 months then, it leaves you with the option to pay up to R700 or R800 on a monthly basis. However, if you are short on repayments then, you should steer clear from applying for the loan.
Nonetheless, if you need a short-term loan on an emergency basis and you are still unable to consider repaying your loan promptly; you should ask your broker to increase the duration of repayment, so it would buy you more time to repay the amount. If you lower your repayments then, the lender will incur a high interest rate on your borrowed amount—which should be the last thing on your mind.
Understand the Risks Associated with Taking a Short-Term Loan
While taking a short-term loan is easy and uncomplicated; you should inquire the risks that are associated with requesting for a short-term loan. Speaking from a general perspective, any borrower should pay its short-term loan amount as soon as it receives its paycheck; however, if it fails to repay the amount on the given time, there will be consequences.
If you do not understand the risks that come with taking a short-term loan then, you should step back from applying for a loan. Several lenders understand the problem of their clients; therefore, they provide lenience to them on the borrowed amount. You should keep up with your repayments to avoid an incremental interest rate on the borrowed amount.
Learn the Association of Short-Term Credit in Influencing Your Overall Score
One of the drawbacks of applying for a short-term loan comes with the risk of influencing your current credit score. For instance, if you have applied for a short-term score then, it would be reflected in your credit score’s record, which would keep you from applying for perennial short-term loans in the future.
If you have applied for a short-term loan sporadically in the past then, it would show up in your records, which might make your lender reluctant to give you the loan. It creates an impression that you are financially corrupt, and they might not consider working with you.
Consider Your Eligibility for a Short-Term Loan
If you are applying for a short-term loan; you would be expected to submit paperwork that would determine your eligibility to apply for the loan. There is a specific criteria that should be met to acquire a short-term amount on your name. Lenders in South Africa have devised several lending models that confirm your requirements to proceed further with the loan application process. If you are a South African citizen then, you should meet the following requirements to apply for the loan:
- Employed with a considerably steady income
- A resident of South Africa
- At least 18+ years of age
- Have a bank account and proof of income
The lender reserves all the rights to perform a comprehensive credit check on the applicant, and your overall credit score will determine your ability to afford the loan. However, if your credit score is beyond average then, you can work out the details with your lender to apply for the loan.
Reach out to Friendly Finance to apply for a short-term loan at competitive interest rates; where you can apply for up to R10 000 without any hassle. Friendly Finance will help you to apply for a short-term loan with multiple lenders across South Africa and find you a suitable lender match in minutes!