Short-term loans vs. bank loans: which is better when you need quick cash?

Need cash now? A short-term loan might be the way to go.

There are several benefits to taking out a short-term loan from a private lending company versus heading to the bank, says Shameer Dada, President of C.A.I. Financial in Port Moody.

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One major difference is the impact on your credit rating.

“Every time you apply for a bank loan, there is an inquiry into your credit score,” he says.

And each inquiry is a hit to your credit rating.

Short-term loan companies, like C.A.I. Financial, do not require a credit check so applying won’t negatively affect your credit rating.

Other benefits of short-term loans include:

• Approval is instant and the funds are typically available the same day

• With a reciprocal loan, using collateral, like a vehicle, boat, RV or ATV, doesn’t require the lender to take over the title, so you can continue using your collateral over the course of the program

• Not a lot of paper work is required; often, the application process can be started online or over the phone 

• While the interest rates are higher, payback periods are flexible and typically there are no penalties for early payouts

• In most cases, with proper collateral, approval is guaranteed

Bank loans, by comparison:

• Typically have minimum credit requirements and each application includes a credit check

• More stringent lending criteria means you might not qualify for as much cash as you need

• Have a set payback period, usually over a longer period of time, with penalties for paying out early

• Loan approval and then getting the funds can often take several days

Still not sure what’s right for you? Check out C.A.I. Financial’s website, call them at 604-492-3440 or send them an email. You can also find C.A.I. Financial on Twitter and Facebook.

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