Common Short-Term Loans Online Terminology You Need to Know

If you’re new to the world of short-term loans, particularly short-term loans online, deciphering all the lingo can be confusing and overwhelming.

To help you make informed decisions about taking out a short-term loan, here are explanations of some common short-term loan’s online terminology: 

APR 

If you ask a financial expert for tips on how to choose the right short-term loan, you’ll most likely get an answer along the lines of “pay attention to the APR.”

So, what exactly is APR? Well, APR stands for Annual Percentage Rate and it’s basically the amount of interest you’ll pay on a loan over the course of one year.  

For example, if you take out a $200 loan with an 8% APR, you’ll owe $16 in interest at the end of one year.

However, since most short-term loans online are paid back within months (or even weeks), the actual amount of interest you’ll end up paying will likely be much less than $16.    

But even so, it’s still important to pay attention to the APR because it can give you a good idea of how much the loan will cost in the long run.

Additionally, lenders are required by law (The Truth in Lending Act *TILA*) to disclose the APR when advertising their loans, so it’s a good way to compare different offers and make sure you’re getting the best deal. 

Bad Credit Score 

To help you get a clear understanding of what a bad credit score is, let’s first explain what credit score is. A credit score is a number that lenders use to evaluate your creditworthiness.

It ranges from 300 to 850 and is typically based on information in your credit report, including your payment history, the amount of debt you have, and the length of your credit history.    

Any credit score below 650 is typically considered a bad credit score. If you have a bad credit score, it may be difficult to qualify for loans or lines of credit from traditional lenders.

Fortunately, having a bad credit score doesn’t necessarily mean you won’t be able to get short-term loans online.

That’s right, while short-term loans online lenders do run credit checks, having a bad credit score is not necessarily a determining factor in whether or not you will be approved for a loan.   

Principal 

The principal is the original sum of money borrowed from a lender. For example, if you take out a $500 short-term loan online, the principal is $500.

The principal is one of the three key components of a short-term loan, along with: 

■ Loan Term: The loan term is the length of time that the borrower has to pay back the debt. Short-term loans are typically loans with terms of less than one year.

■ Interest Rate: Simply put, the interest rate is the percentage of the loan’s amount that the borrower pays to the lender as a fee for borrowing the money. The interest rate is usually expressed as an annual percentage, such as 4% or 5%. The interest rate can be fixed, which means it stays the same for the life of the loan, or it can be variable, which means it can change over time. 

Borrower Default

Borrower default refers to the failure to repay a loan according to the terms agreed upon in the loan contract. A borrower may default for a variety of reasons, including job loss, unexpected medical expenses, or simply mismanagement of finances. 

If you default on a short-term loan, it is important to contact your lender as soon as possible to discuss your options.

Some short-term loans online lenders, like Myfundingchoices.com may be willing to work with you to develop a new repayment plan, while others may pursue legal action. As a result, it is important to work with short-term loans online lenders who are willing to listen if you find yourself in a difficult financial situation.    

Prequalification 

Prequalification, not to be confused with pre-approval, is somewhat a thumbs-up from the lender to the borrower that they may qualify for the loan.

Lenders typically prequalify borrowers by looking at things like employment history and income to get an idea of whether or not the borrower can afford the loan.

Getting prequalified when looking for the right short-term loan for you can save you time by avoiding lenders who are unlikely to approve your application.   

Apply for Short-Term Loans Online with Myfundingchoices.com  

Are you convinced that a short-term loan online is the best solution for your financial needs? Great! The next step is easy – just apply for a short-term loan online with Myfundingchoices.com We offer the best terms and rates in the region. 

Similar Stories