Australia is home to many loan providers. Aussies can get finance for practically any purpose through a variety of lenders, ranging from traditional institutions, such as banks and building societies, through to an increasing number of private lenders and fintechs.
The lending landscape is rapidly changing to accommodate the growing demand for different types, and durations, of loans. Historically, loans have been associated with long-term purchases, like a home loan. Though there’s more and more demand for shorter-term loans for individual and business use.
Short-term loans are becoming progressively popular based on their flexibility and speed. Short-term lenders are often ‘private lenders,’ which means they have far greater control over the loan amount and terms able to be offered. As such, private lenders are renowned for being very flexible with the borrowers they help, as well as the types of loans they write. Also, because short-term loans typically only require minimal paperwork, they’re usually quick to process – which means that funding is often available within as little as a few days.
In this post, we’re going to take a look at some of the key benefits of opting for short-term finance.
1 Enabling ‘opportunity cost’
The concept of “opportunity cost” is essentially when the long-term benefit of pursuing an opportunity outweighs the cost to so, which is usually associated with the amount of money required to facilitate the opportunity. This concept is increasingly prevalent in business and measured based on the potential return that can be made from the investment. However, it’s equally applicable to individual borrowers, albeit where the opportunity cost is often more emotional and psychological.
For example, if a manufacturer invests in a piece of equipment, they will be able to make operations more efficient, therefore producing more goods, and accordingly, make more money. Though the cost of the equipment is substantial, it will essentially ‘pay for itself’ within say six months with the extra profit it is forecasted to generate. Accordingly, a short-term loan for six to nine months could be a great solution. Similarly, an individual may come across an amazing property deal, even though they’re still a few months away from being able to settle on their existing home. In this instance, a short-term bridging loan for a few months would enable the borrower to secure their new home, which otherwise wouldn’t be an option.
2 Get out of a bind
A lot of us find ourselves in debt at one point or another. It might be a slow accumulation or an unexpected sizable bill. Independently, no one enjoys feeling like they are drowning in debt. Rather than bury your head in the sand, it’s a smarter play to assess your alternatives.
One option for businesses in this scenario is to consider a ‘Home Equity Loan,’ which is a short-term loan that enables a borrower to draw equity (cash) from their house for business use. This cash injection is often helpful to ease working capital constraints, or pay an unexpectedly large ATO bill.
Before considering either a business or personal loan, it’s important to ensure that it doesn’t become a financial burden, and that you don’t place yourself in a position to become overstretched with the repayments. On this note, it’s wise to involve your accountant or mortgage broker to make sure you’re making the most suitable decision based on your requirements.
3 It’s easy
The short-term credit loans online application makes it really convenient to apply for finance, as you can do it in your own time from the comfort of home. Depending on the lender, you could even have a decision on your loan application within a day or two. Once your application has been approved, the money will be deposited into your nominated account usually within a few days.
Being able to apply online is not only convenient, but it also helps speed up the loan application process. Supporting documentation can usually be uploaded with your application, further simplifying and expediting the process.
As you can see, taking out finance over the shorter-term has some distinct advantages – particularly for opportunity-takers, as well as to those who may benefit from having a little breathing space from life’s challenges.