Payday Loans

One example of a short-term loan is a payday loan. These loans are designed to provide cash, usually $100 to $500, for a couple of weeks, up to one month.

Title Loans

Another example of a short-term loan is a title loan. These loans provide a sum of cash, usually more than a payday loan, and hold the title of your car as collateral for repayment. These loans are generally for 30 days.

Interest Rate Considerations

Short-term loans usually carry a higher interest rate than long-term loans; short-term loans do not have the benefit of collecting interest over several years. The interest rate on a short-term loan can be as high as 400 percent (sometimes higher), although this is normally expressed as a flat fee.

Loan Renewal

Many short-term loans have a clause allowing the borrower to re-borrow money immediately after payoff. This practice tends to be detrimental to the borrower, as he finds himself stuck in a cycle of payment and re-borrowing, costing him excessive amounts of money.

Benefit of Short-Term Loans

The benefit of short-term loans is that the fee is generally much less expensive than paying overdraft fees from a financial institution.

Source:

Super Pages