Kinds and Types of Online Loans for Poor Credit
A payday advance loan is basically a type of loan where the amount which is borrowed by you and the interest accrued on it is supposed to be paid back within a year according to USWTA.org and direct lenders. It is quite different from a bank loan, and in that, you do not need to pay a short term loan in over years and also it comes with an APR higher than others. The amount of borrowing is ordinarily low, beginning from as small as saying, 50 dollars, and even going up to about 2,000 dollars or even higher in some of the cases.
These short term loans may be apt for those people who suddenly find themselves with a huge expense, and they are unavoidable, like a marriage or a house loan. They can be productive for those who are unemployed or temporarily employed and require something to tide them properly over until their upcoming pay-cheque, whenever they can pay back the interest and the loan.
Kinds of Payday Loans
Basically, short term loans or payday advances do come in numerous forms, as are listed below:
- Merchant Cash Advances
This kind of short term loans are actually an advance of cash but one that is still operating as a loan. And as such, lender basically loans only the amount which is required by a particular borrower. On the other hand, the borrower also makes payments of a loan by permitting the lender to access the credit facility of the borrower. Every time purchase by any customer of the borrower takes place, a certain % of the sale is given to the lender.
- Lines of Credit
A line of credit is more like using a credit card (business) in payday advance loans. In this, a limit for credit is fixed and the business is basically able to tap into that LOC as required. It also makes payments of monthly installment against the amount which has been borrowed. And therefore, payments on a monthly basis which are due will vary as per how much of LOC has been accessed. One merit of LOC over normal credit cards for business is that LOC charges lower APRs.
- Payday Loans
Payday loans are short term loans taken on the emergency that are comparatively easy to get but USWTA.org warns that these types of same day loans should be used with caution. Even some lenders of the high street also offer them. The disadvantage is that the whole amount of loan, plus the interest, is supposed to be paid in just 1 lump sum when the payday of borrower arrives. And Repayments are usually done by the lender who takes out the amount from the bank account of the borrower, through the authority of continuous payment.
- Online or Installment Loans
It is also comparatively easy if you want to get a short term loan in which everything is done through internet i.e. online, from the first application to the last step of approval. Within a few minutes from receiving the approval of the loan, the money is wired to the bank account of the borrower.
- Invoice Financing in Short Term Loans
This type of payday loan is done by the help of accounts receivables of business and invoices that are still not paid by the customers. The lender then loans the money and on that loan charges interest depending upon the no. of weeks for which the invoices stands outstanding. And whenever the invoice gets fully paid, the lender will forthwith interrupt the invoice’s payment and will take the charged interest on the given loan before actually returning to the original borrower what is remaining to business.
Short term loans are actually very much useful for both individuals and businesses. For individuals, these loans are a very effective source of generating funds in an emergency. And for businesses, they also offer a good platform to resolve issues of sudden flow of cash.