Short Term lending

Lending in a bank with short term nature is often considered risky. There are lenders that will work with people or small businesses for short term loans. The length of the loan is often a period of three to four months, sometimes as long as a period of three years. In recent years these types of alternative financial services have come under fire due to their high fees and interest rates. These types of “fringe banking services” are being scrutinized by lawmakers because they are now being seen as lenders that are making the rich get richer and the poor get poorer. It is one thing to make money, that is the reason every business is in business, but there are some that will take it too far.

The list of lending types that are coming under fire are not just the type that advertise themselves as payday loans, cash advances, or loans with no checking account required. Sub-prime auto lenders, high cost second mortgage companies as well as auto title pawn companies are also included on that list. Now not all lending in a bank with short term nature is bad, small businesses actually use this type of loan fairly frequently to cover the costs of payroll or inventory if business is slow. The length of the loan is what will determine the amount of interest that you pay, and it is not always the case that the shortest term means the least amount of interest. Since lending in a bank with short term nature is not only a risk to the borrower because of interest rates, but the lender for taking on the risk see what length of time is appropriate for what you need; if you can get a loan term for a period of three y ears but pay it off in one with no penalty for early pay off it might work to your advantage. Since you are there looking to borrow money do not be afraid to ask questions, I see that happen all the time and when I ask them well how does it work, I often get the answer “ well I am not sure, but I got the loan”. I get very annoyed with people when they do not take the time to find out what they need to know, whether it involves finances or homework there is nothing wrong with asking questions. Teachers are paid to teach, bankers are there for lending and the loan officer that you are dealing with is getting paid to answer your questions, do not be afraid to ask them, you have to work for your money so understand that there is nothing wrong with making them work for theirs.