Short Term Loan Eligibility The Significance of A Loan Term
Short term loans can be repaid in three months, six months or a year. Some short term loans like payday loans may have to be repaid in one month. Some short term loans can have a repayment term of two years. The term is almost always determined by the lender. It is made available to a borrower and he or she may agree or disagree. Many lenders will offer a selection of terms. This works better for those who do not find the standard repayment terms as convenient.
The significance of the term must not be understated. This is because it can affect eligibility and hence whether or not a borrower gets approved. Let us understand how term can influence the repayment and hence affect eligibility.
A thousand quid borrowed at the rate of twenty percent simple interest charged annually being repaid over twelve months will have a monthly installment of a hundred quid. The same installment will reduce when the term is stretched to eighteen months, although you would be paying more owing to additional interest. The installment would increase if you choose a six month term although you would be paying less interest. Hence, the choice of term directly affects your installment given the interest rate is unchanged.
If you can afford to pay more every month then you can opt for a shorter term. Else, you can go with a longer term. Many lenders will not offer you the luxury to choose a term. But that can mean you would have the possibility of getting turned down should your disposable income and applied loan amount be at odds for the chosen term. Look for lenders that have flexible terms so you can pick one that makes your case stronger and you can comfortably pay the monthly installments.