Types of Short Term Personal Loans

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 (e.g. $1,000 to $15,000), along with a short repayment term and high interest rates.

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 credit union. Credit unions generally have less strict lending policies than traditional banks.

Payday Loan

If you're considering an emergency cash loan, but you have poor credit, a payday loan may be your best (and only) 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 (e.g. a paycheck).

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 a bounced check, 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.

Bridge Loan

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.

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