Question

Which of the following is/are not the reason(s) of short term finance?

• A. No longer term commitment with this type of loan.
• B. Short term loans are available quickly.
• C. Short term loans could cost less.
• D. All of the above

Answer 1

The correct option is D All of the above

1. Short term loans are available quickly. One of the defining features of short term loans is that you can borrow them fast – sometimes even on the same day or within 24 hours. This makes financing, such as payday loans, ideal if you find yourself in a situation where you need cash fast.
   
2. There is no longer term commitment with this type of loan. With short term loans you only need to focus on the immediate future as the loan is paid off within a much shorter space of time. Many people find it intimidating to commit to borrowing over a period of many years, worrying about making the payments and managing the loan with all of life going on around. With short term loans this isn’t an issue as repayment terms can be as short as a month, leaving you free to repay and move on.
   
3. Short term loans could cost less. The longer you borrow for, the more interest you will pay. Short term loans offer a simple way to borrow the cash you need and to pay less for it – the shorter the term over which you borrow the money, the less interest you will pay. As you have not secured your home or car with short term borrowing there is also less risk of losing them if you cannot make repayments. While you should always make sure that you only borrow what you can afford to repay, avoiding the risk to your home or car that some longer term loans create can take the pressure off for many people.