Definition of Short-Term Loan

Video Transcript

"This is financial adviser, Patrick Munro, talking about the definition of a short-term loan. Loans, of course, are a privilege to have if your credit is worthy. And there are various types of loans, ranging from long-term loans on real estate; those are known as mortgages; to securitized loans on automobiles and boats. Those normally range in, because of the price of cars and boats, up to 60 to 84 months. Well, that's not considered a short-term loan. A short-term loan, of course, is something that you would only need for a period of less than a year, sometimes less than a month. Those short-term loans that are less than a month are referred to as payday loans. If you get involved in the world of payday loans, which are basically a bridge loan to get you from one paycheck to the other, make sure that you're working with a member of the Payday Loan Association and that you're not paying an exorbitant rate of interest. Make sure also that you don't take out more of a loan than you can be paid back in your next paycheck, because the interest rates are very exorbitant for these short-term loans. This is Patrick Munro talking about the definition of a short-term loan."