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What is a Short Term Loan?

Short term loans are an effective way to raise money quickly, and they’re especially useful for people with bad credit. But how do they work, and who offers the best short term loans? Read through the rest of this post to find out.

No matter how good you are at budgeting, any unexpected financial complication – an emergency car repair, unexpected medical bill, or any other sudden expense – can wreak havoc on your finances.

The best way to deal with financial crises is to set aside money in an emergency fund that can be used to cover unanticipated expenses, but very few Americans can actually afford to do that.

In fact, recent studies indicate that 60% of Americans don’t have an emergency fund of any sort to act as a buffer when facing these kinds of unexpected expenses.

Fortunately, people facing a financial crisis aren’t alone, and can find assistance by lining up a short term personal loan available thorugh online lenders or in person. This post will introduce you to short term loans, talking about how they work, discussing the many different types available and explaining how you can get one for yourself today.

How do Short Term Loans Work?

A short-term loan works exactly like a regular loan in that you borrow a set amount of cash and agree to pay it back, in addition to any fees, in a series of installments.

The biggest difference between short term loans and traditional loans is that they have to be paid back more quickly, typically over a period of days or weeks, rather than months or years.

Short term loans are designed to help borrowers facing a financial pinch, allowing them to get some needed cash for unexpected expenses, or budgeting shortfalls.

Thankfully, short term loans are offered in a variety of different types, including forms that are perfect for people with poor credit.

Read on to discover which type of short term loan might work best for you.

Types of Short Term Loans

Most short term loans function in a similar capacity – they’re disbursed the same day they’re applied for, they’re offered in relatively small amounts, and they don’t require a great credit score.

With that said, different types of short term loans are better for different financial situations, and you’ll want to make sure you pick the right type of loan that compliments whatever problem you’re facing.

Here’s a breakdown of each type of short-term loan, including a few pros and cons to help you determine which type of loan will best suit your needs.

Payday Loans

A payday loan is a small unsecured loan designed to be repaid in full the next time you receive a paycheck.

In order to provide you with cash, lenders will require some borrowers to provide proof of employment (usually a paystub). Once you’re approved for a loan, you should be able to get the cash you want within the day.

Payday loans are controversial, and have been banned in several states, because some people believe that they’re a form of “predatory lending” that mires people in never-ending debt.

However, some responsible people have used payday loans to cover shortfalls and prevent themselves from facing financial ruin. In certain situations, payday loans do make sense.

Advantages of Payday Loans:

  • Payday loans are accessible to anyone who can prove their income, even people with very poor credit scores
  • Payday loans are fast, typically providing the cash borrowers want within hours

Disadvantages of Payday Loans:

  • Payday loans can be incredibly expensive, with many lenders requiring interest rates that most people would find outrageous (significantly more expensive than all other forms of lending)
  • Payday loans are notorious for including hidden fees that can dramatically increase the amount of money you’ll be required to pay back
  • Payday loans have to be paid back in full (plus interest and fees) as soon as you receive your next paycheck, which is no easy task for people already facing money problems
  • Payday loan lenders sometimes resort to aggressive collection practices that scare borrowers into paying back their loans, even when they really can’t afford it

Cash Advances:

A cash advance is a service that is offered by credit card agencies. This service allows cardholders to borrow cash up to a certain limit (determined by their credit limit).

Credit card cash advances are available in person at a bank, through an ATM, or via online banking.

Many people rely on credit card cash advances when they face an unexpected expense, but this form of lending is typically used only for small shortfalls (like a few hundred dollars).

Keep in mind that cash advances are only available to people with credit cards, typically good credit scores, and room left before reaching their credit limit.

Advantages of Cash Advances:

  • Cash advances are quick and easy to get in a pinch
  • Cash advances are provided directly by your credit card company, so you won’t have to go to a third party lender

Disadvantages of Cash Advances:

  • Cash advances are only available to people with credit cards
  • Cash advances are limited because they can only provide as much money as you have left before hitting your credit limit
  • Cash advances come with interest rates that are typically much higher than the rates you pay for a regular credit card transaction
  • Cash advances often include a lot of fees that make them more expensive than other short term loans

Auto Title Loans:

An auto title loan – otherwise known as a car title loan, cash title loan, or vehicle equity loan – is a type of secured loan where the borrower uses their vehicle as collateral to borrow money.

Car title loans are straightforward, simple, and available to anyone who has a clear title on their car.

The way they work is that the borrower gives temporary possession of their title (pink slip) to a lender, in return for a cash loan based on the value of their vehicle.

When the borrower finishes paying back their loan, they get their car’s title back from the lender.

Just like all other short-term loans, car title loans are fast and available to people with poor credit, but a significant benefit to car title loans is that they’re secured loans (which typically come with lower interest rates and fees), and they’re also capable of raising substantially more money than other types of short term lending.

Advantages of Car Title Loans:

  • Car title loans are available to everyone with a clear title, even people with credit problems
  • Car title loans are extremely fast, capable of providing the money you want within minutes
  • Car title loans are easy to get, requiring just a few minutes of your time
  • Car title loans are capable of raising lots of money, including tens of thousands of dollars (since the loan amount is based on the value of your vehicle)
  • Car title loans are convenient, because you’ll often have months or even years to pay back your debt (unlike other short term loans that are due in days to weeks)
  • Some car title loans companies (like City Loan) allow you to keep driving your car throughout the course of the loan

Disadvantages of Car Title Loans:

  • If you default on a car title loan, then you may end up having your car repossessed

Which Type of Short Term Loan Should I Choose?

That’s a tough call, and one that will require looking at your specific financial situation to determine which form of short term lending will work best.

However, for most people, car title loans are simply the best available option, because they’re the safest, cheapest, and most reliable way to raise lots of money quickly.

If you only need a couple hundred dollars, then you should probably look elsewhere, but for anyone who needs several thousand bucks, we recommend taking out a car title loan.

How Will a Short Term Loan Affect My Credit Score?

Short-term loans, like all other lending options, can have tremendous credit implications. However, if they’re utilized properly and paid back within the specified time-frame, they can actually help improve your credit score.

It’s estimated that approximately 35% of your credit score is calculated by looking at your payment history. According to that logic, taking out a short-term loan and making your payments on time will help boost your credit score.

To maximize the positive impact of your short term borrowing, follow these three easy steps:

  1. Maintain a positive payment history (don’t fall behind in your payments)
  2. Pay more than the minimum amount of money due each month
  3. Get the loan paid off in full as quickly as possible

As long as you follow these three rules, taking out a short term loan will lead to positive results for your credit score, allowing you to build better credit and borrow money at a cheaper rate the next time you run into a shortfall.


City Loan Long Beach Can Help

Financial complications can occur at any time, but they almost always happen when we aren’t prepared to deal with them. Thankfully, short-term loans were designed to help cover those financial shortfalls, and they offer a safe, affordable and convenient solution to dealing with financial problems.

If you need cash for any reason, City Loan can help. Our car title loans are fast, easy and convenient.Even if you have bad credit, we may be able to help. That’s why we’re known as the best provider of short term loans for people with bad credit.

No matter what your financial history looks like, whether it includes late payments, previous repossessions, loan defaults or even bankruptcies, we may still be able to get you thousands of dollars today.

Find a City Loan Near You!

Our main office is located in Long Beach, California at: 

3431 Cherry Ave,
Long Beach, CA 90807

Don't worry if you're not located near our Long Beach location, our service area spans several states! If you're located anywhere in South Carolina, Missouri, New MexicoArizonaUtahCalifornia, or Texas we can help get you the car title loan you need! Even if you don't see your state on the list, you should contact City Loan to find out if were expanding service to your area. 

No matter what your financial history looks like, whether it includes late payments, previous repossessions, loan defaults or even bankruptcies, we may still be able to get you thousands of dollars today.

Get the cash you want today by calling us now at 1-888-238-9085, or by filling out our easy online application.