What should you plan for, when asking friends and family for a short term loan?
Short-term loans are loans which are scheduled to be repaid in less than a year. They can be helpful when those unforeseen expenses pop up like a doctor’s bill, a car fender bender. One of the more common types of short-term loans, are payday loans, which have high interest rates and strict repayment policies. Check out some of the best value short term loan providers in SA here.
Payday loans should only be an option as an emergency or last resort, because they’re much easier to obtain than a traditional bank loan. Short-term business loans are a little different, as they’re a bit larger and are paid back over a slightly longer period of time. Therefore to afford a short-term loan follow these 5 easy steps.
When asking for a short-term loan from family and friends:
1. Get your paper work in order
This option is especially useful if you don’t qualify for a regular bank loan. But it’s still no excuse to slack on your approach with a potential lender. Have a clear idea of how much you need and how quickly you can repay the loan. This will help the lender establish their expectations for being repaid. Do so by communicating your repayment plan to the lender.
2. Also craft a loan agreement
As a safeguard for both you and the lender, you should draft a loan agreement that spells out the terms of the loan. This “promissory note” is a contract that shows ID information for you and the lender (names and addresses), important dates like the start date and repayment dates, the total amount loaned, and each individual payment amount.
When asking for a short-term business loan:
3. Review your credit report
Clean up any blemishes that you can. Lenders will review your credit report, credit score, and history of making timely payments under credit cards, loans, and vendor contracts.
4. Make sure you qualify
Every lender will have slightly different terms, but in general, they’ll require that you‘ve been in business for a minimum length of time. That you’ve a decent credit score, and that your business meets a certain annual income level.
5. Locate and shop around for a short-term loan
There are plenty providers who serve a variety of customers and vary in their professionalism. Visit a bricks and mortar lender or search online to get quotes, assess values and loan value repayment terms.