Short Term Loans

Short-term loans range from $100 to $2,000 and can be paid back in as little as 16 days to a year. Depending on the lender, the turnaround time for a short-term loan ranges from 6 hours to 48 hours.

Read on to better understand the features, benefits, and disadvantages of short-term loans as well as the costs associated with getting one. We will also tackle the repayment period for short-term loans and how you can determine if short-term loans fit your financial needs.

A short-term loan is an unsecured loan amounting to $100 up to $2,000. Since regulations prohibit lenders from offering loans with repayment terms of less than 15 days, these loans have a minimum repayment term of 16 days up to 12 months. Lenders also offer 60-minute loan approval for applications completed online, with loan proceeds disbursed within minutes from the approval of the loan for some bank accounts and lenders.

Some of the loan features include:

• The smaller loan amount and shorter repayment terms
• Fixed monthly fees and establishment fees: the establishment fee in any short-term loan agreement should not exceed 20% of the loan amount and the monthly fee should not exceed 4%.
• Online application process: to provide quick cash to borrowers, lenders offer 100% online loan applications through their website or a downloadable app.

To apply, simply go to the lender’s website and fill out the online application form. To be eligible to take out a loan, you need to meet the following criteria:

• Be at least 18 years old.
• An Australian citizen or permanent resident.
• Have proof of identification.
• Can provide 90 days of bank statements through your bank credentials and internet banking details.
• You must have a regular income source. If you are getting Centrelink benefits to augment living expenses, it is a requirement that you cannot exceed 50% of your overall income. If you have a bad credit score, you must demonstrate that your financial circumstances are steady and that you can repay the loan.

Several lenders offer same-day loan approvals whilst others would have as fast as a 10-minute loan approval process, with funds release within 60 minutes from the time of final loan approval. But do note that this may only be applicable for loans approved within a certain cutoff period and for borrowers banking with specific institutions. It’s a good rule of thumb to consider all lender options available to be able to find the best deal for your financial need.

The maximum fees a responsible lender can charge are fixed by the Australian Securities and Investments Commission. The following are the fees associated with small loans:

• Establishment fee: a one-time establishment fee should not exceed 20% of the loan amount taken.
• Monthly fee: The monthly repayment fees should not exceed 4% of the loan amount per month.

Other related fees include default charges, which can go as high as 200% of the borrowed amount, and the enforcement fees incurred by the credit provider to recover the amount you owe under your loan account.

The comparison interest rate of a short-term loan compared to a traditional personal loan can appear very high. However, the loan is not borrowed over a 12-month + period like most other loans, so the interest rate is not a good indicator of cost. As a short-term loan is borrowed over a much shorter period of time, it is better to look at the total cost of borrowing.

Short-term loans also involve a higher amount of risk for the lender as borrowers are more likely to default on repayments. To cover this risk, the costs of borrowing may be higher.

A short-term loan can be repaid over a loan term of 16-days to 12 months. The loan term will vary depending on the lender and the amount you wish to borrow. Repayments are usually processed on a weekly, biweekly or monthly basis and are automatically debited from your account. Your loan agreement will outline the repayment frequency and term, so carefully read this before signing to make sure you can afford the repayment schedule.