No matter how much you care about your finances, there will always be unforeseen circumstances where you will run out of money. In this case, a short term loan can save the day.
What is a short term loan in the Philippines and what are its advantages and disadvantages? Read on to find out more.
What is a Short Term Loan?
Short term loans offer smaller loan amounts and shorter repayment periods than long term loans. You have to pay off a short term loan in full in less than a year. It also comes with a higher APR.
Most Filipinos apply for a short-term loan to meet minor expenses and financial obligations. For business owners, a short term loan can help fund their business needs to keep them going.
The repayment period for short-term loans can be adjusted according to the borrower’s request. But they are usually paid off in a month. If the chosen repayment term is longer than a month, it should not exceed 12 months.
Short term loans are unsecured loans, which means they do not require any collateral. You also don’t have to borrow against the value of your property. The downside, however, is that the interest rates are higher as the risk of default by the borrower or non-payment of the loan is also higher.
What Short Term Loans Are There In The Philippines?
This type of short term loan can release your loan proceeds in just 24 hours. But payday loans are high interest loans that are usually due the next payday. You can take out between PHP 1,000 and PHP 30,000 in loans, but the loan usually only needs to be paid back once.
This short-term loan gives you access to a fund that you can draw on at any time. The credit period for a line of credit is between six months and one year.
Once you have paid off the loan in full, you can borrow the full amount of your credit line again. Corporations and startups usually have a line of credit to cover cash flow gaps. However, it is only used when needed.
An online loan works the same way as a payday loan, where online loan platforms offer short term loans to borrowers. The application is submitted online and the loan proceeds are paid out to a nominated savings account. It’s very quick and easy, and you can do it all on your mobile device.
Continue reading: Online Loans In The Philippines: What Filipinos Need To Know
Entrepreneurs in a liquidity crisis can opt for invoice financing. This type of short term loan uses your company’s unpaid accounts receivable as collateral. With invoice finance, you don’t have to wait for your customers to get paid to pay your own employees, suppliers, or operating costs.
Cash advance for dealers
With this type of short term loan, entrepreneurs receive a cash advance and then pay it off from their company’s daily credit card sales. One of the perks is the flexibility of payment based on the company’s credit card sales. However, the fees and interest on this type of short term loan are quite high.
What Are The Best Short Term Loans In The Philippines?
A quick Google search for the best short term loans in the Philippines gives you plenty of options. Some of the popular short term loan providers are Cash Mart, Robocash, Cashalo, Pera 247, Aeon Credit Service, LendPinoy and, Talajust to name a few.
Each loan provider has its advantages and disadvantages, so do your research to find out which one offers you the best interest rates and the easiest repayment terms.
In addition, you can view the list of registered online loan platforms on the Securities and Exchange Commission website to help you make a decision.
5 Tips on How to Get a Short Term Loan
1. Look for the best short term loan provider
Check reviews or feedback online before submitting your loan application. This can help you stay away from moneylenders who are illegitimate, have a bad reputation, or are misbehaving unethical lending or collection practices.
2. Prepare the required documents
Once you have found the right short term loan provider, prepare your loan application requirements. The great thing about short-term loans is that they usually only need a valid ID, proof of income, and proof of invoice.
3. Fill out the loan application form
Provide the required information and make sure your contact information is correct and up-to-date. A properly completed application form also speeds up the verification and approval process.
4. Wait for your loan approval
If you meet all the requirements and submit all the required documents, you should receive an update on your loan application within a few hours. However, this also depends on the size of the applications that the loan provider processes.
5. Understand the terms and conditions
Be aware of the fees, fees, and interest rates of the loan. If everything is reasonable and meets your expectations, you can send your confirmation and wait for the loan proceeds to be paid out to your account.
Short term loans can indeed be life saving. In addition to the simple application and quick processing, you will receive your money exactly when you need it most.
However, a short term loan in the Philippines also comes with a much higher interest rate. Since it is easier to avail, you can be tricked into repeatedly applying for a loan when you are short of funds.
You don’t always want to be in debt, do you? It’s still best to stay on a budget, manage your expenses, invest some of your income in savings, and build your emergency fund. When you make this a habit, you will be prepared for any type of financial emergency and not have to take out all of these loans!
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