Understanding the Nature of the Short Term Loan and Who is Eligible for This Type of Funding
Life has a way of presenting people with all sorts of challenges. Many of those situations require a quick infusion of cash in order to resolve them. What would you do if something came up and needed attention now? Opting for a short term loan provided by Magical Credit could be the answer. Here are some basics that you should know about short-term loans.
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What is Considered a Short Term Loan?
A short-term loan is a lending arrangement designed to last for no longer than one year. That includes loans with a duration of anywhere between a couple of months to a full year. Some of these loans are repaid in one lump sum while others are settled using a series monthly, biweekly, or weekly payments. In many instances, the purpose of this type of loan is to address and resolve a need that needs to be dealt with immediately.
There are loans of this type that require pledging some sort of collateral. Others are unsecured loans. It pays to consider both types, since you may find that one comes with a slightly lower rate of interest and fewer fees.
The Matter of Employment
While there are lenders who extend short term loans to anyone with a verifiable source of income, others limit this particular loan type to those who are currently employed. It’s not necessarily enough to confirm that you currently have a job. The amount of time that you’ve been with your current employer may also be a factor.
For example, there are lenders who require all applicants to have at least six months of employment history with their current employer. The lender can verify the employment history by contacting your employer and confirming that you’ve been there for at least six months.
If you’ve just started with a new employer, this type of loan may not be a good fit right now. In that instance, you may want to consider an alternative loan type that does not include this particular requirement.
The Amount of Monthly Income That You Generate
Along with confirmation of your employment and the amount of time you’ve been with that employer, the income that you generate each month will also be important. Lenders of all kinds typically require that applicants demonstrate the ability to repay loans based on the income generated per month. Specifically, the applicant must provide confirmation that the income source amounts to at least the minimum set by the lender.
There is no universal figure set for that minimum income requirement. In order to know if you have enough money coming in to qualify for a short term loan, consult the guidelines that the lender provides. Don’t despair if the amount required is more than you currently receive each month. There’s a good chance that a different lender will consider your income to be sufficient and be willing to process the application.
An Active Bank Account
Another factor that will impact the ability to receive a short term loan is your bank account. You must have one that’s currently active. Some lenders will require that all applicants have a checking account in their names. Others may be willing to work with applicants who have active savings accounts.
Many lenders today utilize electronic funds transfers to get money to applicants who are approved. If you have a valid bank account that meets all of the lender’s requirements, the money will be deposited in that account a short time after all the paperwork is completed. This is actually safer and more secure for you. There’s also the convenience factor, since many people are likely to pay for pressing needs using a card associated with the bank account.
Your Wages or Salary is Deposited Directly into Your Bank Account
There’s another reason why many lenders want applicants to have active bank accounts. One of the more common requirements is that the money you earn from a job is automatically deposited into the account. This provides one more way to confirm that you do have enough income to meet the lender’s requirements. By supplying a bank statement that shows the inbound funds transfers, there’s no doubt that the money to manage the loan effectively is present.
If you don’t have a direct deposit arrangement with your employer, look into setting this up before applying for a loan. This process is actually to your benefit, since there’s no need to physically go to a bank to deposit your pay or to use an app to submit an image of the payment and wait for the bank to accept it and credit the account.
Agreeing to Set Up Electronic Payments
Another factor that the lender will want to discuss is ensuring the loan payments are made in a timely manner. This typically involves agreeing to allow the lender to initiate an automatic withdrawal on an agreed upon date each payment period. That date is usually set so that the payment can be received and credited to your loan account on time. Thanks to this arrangement, you don’t have to be concerned about payments arriving late or never showing up at all.
You enjoy the benefit of knowing when the withdrawal takes place by checking the bank account balance. Assuming you have online access to the bank account, you can verify that the transaction is complete and the amount is correct. Pair that with the online access to the loan information and it’s easy to see when that payment posts and the amount is deducted from what you owe.
An Established History of Paying Your Obligations
While many lenders of short term loans offer more flexible terms and conditions than their more traditional counterparts, it’s not unusual for your credit scores and most recent activity to be a factor. For that reason, don’t be surprised if the lender pulls one or both credit reports and takes a look at how well you manage your current obligations. Assuming you are up to date on your debt payments, the odds of being approved are higher.
Keep in mind that having a few issues several years back won’t necessarily lead to a rejection of the application. It’s your history over the last couple of years that will carry more weight with the lender. If you’ve stayed current on everything for the last year or so, the lender is likely to give the application every possible consideration.
Keep in mind that short term loans, especially emergency cash loans are not a long term solution. They are designed to provide funding for issues that need to be settled quickly. Determine how much money you need and have a plan in mind for working the loan payments into your monthly budget. Check your credit reports before applying and be prepared to respond to any questions the lender may pose. With the right approach, the lender is more likely to approve the application and have the money to you as quickly as possible.