All short-term loans have the general format of being borrowed and then paid back in a short amount of time. Short term loans are usually borrowed in amounts ranging from a minimum of €200, to a maximum of €5000. Even though the principle is the same, there are different type of short-term loans. It mainly has to do with the reason for acquiring the loan.
- Overdraft- The unintentional loan for a crisis or accident coverage
Most banks offer an overdraft protection that allows an account to be overdrawn for a fee to the account holder. The overdraft fee is something that is agreed upon during the time of opening the bank account. It is usually either a fixed amount for any overdraft amount, or a percentage of the amount overdrawn. In most cases, an overdraft is either an accident due to bad financial planning, or it is done intentional in a crisis the calls for urgency and dealing with the consequences at a later date.
- Payday loans
As the name suggests, a payday loan is a type of Short-term loan that you can borrow until your next payday. For this loan, the requirements are very lenient. All you need is proof that you have a job and that you will be able to pay back the loan in a reasonable amount of time. Ideally, this loan should be paid back in two weeks up to a few months.
- Bridge loans
Bridge loans are typically seen in the property market. It is a loan that is borrowed when someone is in between transactions usually involving selling a house to buy another. The loan is meant to carry you forward with payment on the new house while the selling of the old house is still being finalized and negotiated. If one property is still on the market but you need the money to start things in the new house, then this loan is there to bridge the gap.