What is a Short Term Loan?
Wed, 11 Nov 09
In lending and financial markets, a short term loan is generally a loan with a term of less than 365 days.
Generally speaking, short term loans share the following characteristics:
- Some form of real property is utilised by the lender as security
- A caveat and/or mortgage is utilised by the lender to protect their interest in the security property
- The interest rate charged is significantly higher than a 'normal' mortgage
- Application process takes days not weeks
- Generally no financials or credit checks are required
Compared to a 'normal' loan, a short term loan may provide the borrower with the following advantages:
- Speed: Generally, once a short term lender has all the information they need, the approval and settlement occurs within 72 hours. This will never happen with a 'normal' lender where you will often wait weeks until settlement.
- Flexibility: Generally a short term lender is not as constrained with credit policy rules and regulations as a 'normal' lender. This often means that a loan a 'normal' lender will decline may be approved by the more flexible short term lender.
A 'normal' loan in contrast to a short term loan, may provide the borrower with the following disadvantages:
- Cost: The annual interest rates applied to short term loans are significantly higher.
- However, paying a high interest rate on a small loan for a short period, may well be less expensive than refinancing an increasing the size of an existing loan and paying a lower interest rate on a larger loan for a longer period.
Short term loans are also often called or labelled:
- short term finance
- short term funding
- caveat loan
- caveat finance
- bridging loan
- bridging finance
- private finance
- private mortgage
- second mortgage loan
- second mortgage finance
For more information, or to apply for a short term loan, simply call 1300 844 851.
« Back to Articles