Loans come to the rescue when an urgent financial need arises. Simply put, loan is a transaction between the lender and the borrower. It is advisable to understand not only the basic concept of borrowing but also be informed of the different kinds of loans. There are different types of loans for different needs and understanding the need ensure that the right kind of loan is secured.

Short term loans are designed to meet the urgent needs of the borrower and the amount is usually small. A quick loan may be required to pay up a household bill or the battery of the car dies and has to be replaced immediately or the school going kids require some money for a school activity. Any of these urgent needs may arise and one may not have the money available at that moment. Short terms loans are borrowed which have to be paid back within a limited time.

Short term loans are easy to process and money is usually available within twenty four hours. Payday loans are also known as cash advance loans which are a common form of short term loans. In case of urgent need for money, payday loans are life-savers. All one has to do is make an application to the lender with proof of a job and bank account where money is transferred on payday. The lender checks these simple credentials and immediately transfers the funds into the borrowers account within twenty four hours. The repayment of the loan is on the day the payday check gets deposited into the account of the borrower. Since the repayment time is short, it is called a short term loan.

Short term loans are unsecured loans. This means that no collateral security or any form of guarantee is asked for by the lender. This is the reason why unsecured loans carry a much higher interest rate as compared to the secured loans. If one requires a larger amount of money for a business or buying real estate then a long term loan has to be taken against which the borrower has to give some form of security. The period of repayment of this loan is much longer and interest rates are comparatively lower than those for short term loans.

For short term loans, the borrower pays a higher rate of interest as these are unsecured loans. As the loan is unsecured, the lender is at a risk if the borrower fails to pay back the loaned amount. This loan is given by the lender on sheer trust that the borrowers will payback the money on the decided date. The amount being much smaller and the risk for the lender being higher, the interest charged is higher and the time for returning the amount is much shorter too.

When applying for a loan, ascertain the financial need and accordingly apply for short term loan which includes personal loans, bad credit loans or payday loans.