Short term are loans that have an maturity duration of less than one year. These loans are normally used to fund small businesses. There are a number of factors that these business people can take into consideration before getting a short term loan.
Before you take a short term loan, it is important to establish if there are any hidden charges. Ask the lender to explain to you the upfront charges. This is because there are some lenders who charge you different types of upfront fees such as the processing fees, origination fees, appraisal, underwriting, and even administration charges. These fees may make the loan very low expensive and may fail to break even if you use it for business. This then makes the loan a burden and it might risk default.
Another factor to consider is the interest rates. A business person should choose a low interest rate loan because they demand for low interest payments. These payments are normally made monthly and may accrue a penalty they are not paid on time. It is important to note that interest rates may vary depending on who is issuing the loan. In some instances, business people are allowed yo negotiate with banks and other lenders so that they get an interest rate that also favors them. Click here for more details about short term loans.
One should also consider the capacity to repay before they get a short term loan. The capacity to repay basically answers the question am I able to repay the loan on the stipulated time period. One can calculate this by looking at their disposable income. It is good to note that even if you are able to repay on time, it is advised that you do not borrow beyond your actual needs. If you do so, it stops being a loan and becomes a burden.
The size if the down payment is also a factor that needs to be considered . Although short term loans are not characterized by down payments, some lenders may ask for them. It is up to the borrower to see if they are comfortable with that down payment. If they are not then they can request for a fair down payments or leave it at that.
There are so many factors that can be used to gauge whether one should take a short term but it is only a few that have been discussed above. It is therefore the duty of the borrower to make more research about short term loans before committing. Click on this link for more info: https://en.wikipedia.org/wiki/Small_business_financing.
