With so many short term loans available, selecting the right one to suit your needs can be a time-consuming and confusing exercise. Here’s a guide to using the best short term loan product for your needs:

1. Firstly, ask yourself how long you need the short term loan for; days, weeks or months? Once you’ve answered this question you’re a step closer to selecting the right short term loan. Different loan terms and interest rates apply, with short term loan amounts ranging from a few hundred dollars to a few thousand. For real estate, business or investment purposes however, short term loans of much higher amounts can be approved. The kind of short term loan you need will indicate where you should go to get it.

2. What do you need the short term loan for? The loan purpose can drastically change the amount you can borrow, the applicable interest rates and the amount of paperwork required to secure the short term loan.

3. When and how quickly do you need the short term loan? If it’s an emergency you’ll need the money fast. Timing is an important factor in selecting your loan provider – if your car breaks down most people need to have it fixed immediately. However, if you need the short term loan to help you cover your car registration costs in a month’s time, then there will not be as much urgency and hence, you may be able to source cheaper finance.

4. Who should you borrow from? If you’re only looking for a short term loan for 2 weeks, then it certainly isn’t a huge commitment that will require an exhaustive search for the appropriate lender. If you can borrow the money with an easy application process, as little paperwork as possible and fair fees and charges, go for the most convenient. Of course, with short term loans, people are usually more focused on solving a problem quickly than with enduring the consequences of spending a great deal of time trying to shop around to save a few bucks.

Best short term loans on the market?

Short Term Loan Option 1: Cash Advances & Payday Loans

The quickest option for a short term loan is known as a ‘cash advance’ or ‘payday loan’. These are usually small loan amounts of under $1000 that are repaid within days or weeks, and are usually directly debited from your account on your next payday. Due to the small loan amounts and repayment period, they are assessed more-so on your employment and pay cycle and therefore provide as much access for people with bad credit ratings as those with ‘squeaky-clean’ credit histories. It’s important to keep in mind though, failing to repay a cash advance or payday loan can quickly put a black mark on your credit file so only borrow what you can truly afford to pay back.

Common reasons given by those who favour payday loans usually revolve around life’s little surprises, infrequent but necessary living expenses or commitments that creep up on us all. For example, urgent car repairs, rental bonds, white good replacement or repair (fridges and washing machines), and unexpected bills.

Short Term Loan Option 2: Short Term Unsecured Personal Loans

Major banks tend to lend between $5,000 and $50,000 on loan terms between 1 and 7 years. A short term unsecured personal loan may be approved for any ‘reasonable purpose’ and can include car loans, holiday loans, wedding loans, along with furniture and household-related loans (such as repairs or minor renovations). When applying for an unsecured personal loan with a term of 3 to 7 years, be conscious of the repayment frequency – you can take months off your repayment time and a significant amount of money (in terms of interest) by increasing your repayment frequency from monthly to fortnightly or weekly.

Short Term Loan Option 3: Short Term Bank Overdrafts

Some banks are happy to approve short term loans in the form of bank overdraft facilities. If you have a good credit rating and a strong relationship with your lender, you may be given approval to overdraw your account for a pre-approved amount and agreed repayment period.

Short Term Loan Option 4: Short Term Secured Loans: Caveat Loans, Second Mortgages & Bridging Finance

Caveat loans, second mortgages and bridging finance can be used to cover shortfalls in a variety of scenarios. Commonly, these loans are used pending a property settlement, for business reasons (see short term business loans) or for investment purposes (see short term investment loans), and they are usually secured with real estate property. Lenders usually require an ‘exit strategy’, which means you will need to satisfy the lender as to how and when you will repay the short term loan. An example of this is when you are selling your house and waiting for the funds to settle. If you suddenly find your next home and require fast money for a deposit, you can use one of these short term loans to bridge the gap and then fully repay the loan upon settlement of your property sale.

Short Term Loan Option 5: Secured Personal Loans Using Motor Vehicles as Collateral

If you need up to $10,000 and you have paid off a motor vehicle that’s in good condition and of equivalent value then it’s possible to secure a loan using your motor vehicle as collateral. This is suitable for those who do not own, or those who are not paying off real estate property. Contact us for more information.

The Cost of Short Term Loans

The interest rates on cash advances and payday loans are usually higher than on short term bank loans and credit cards. Further, the loan is repaid and finalised in a matter of weeks and the interest is calculated on a lower amount. Getting a cash advance is like hiring a taxi – it costs more than running your own car, but if your car has broken down and you have an urgent appointment, it’s a fast and convenient way to solve a problem in the short term. Unsecured personal loans are the next costly in terms of interest rates as the loan amounts are larger and they present greater risk to the lenders due to a lack of security. This is followed by caveat loans, second mortgages and bridging finance arrangements (given the urgency of the loans) and finally, secured personal loans – these tend to have longer loan terms, and although they charge a lower interest rate, the larger loan amount and increased repayment time may end up costing you more in the long run. Use our loan repayment calculators to see what the costs involved are.

To enquire about a short term loan with the Australian Lending Centre simply call 1300 138 188 today to speak with a loan consultant or simply fill in the enquiry form to your right and a loan consultant will contact you shortly.