The institute of money lending and, particularly, loaning includes several different types. While large businesses and people with good credit scores can apply for huge amounts with the most favorable requirements, many customers just aren’t eligible. Thus, they look for offers with lower requirements—short-term loans. Moreover, enterprises and reputable individuals can also opt for short loans when they need to cover daily costs quickly.

These are the reasons why these loans are quite popular. The following information reveals the basics of short-term loans and the defining trends of this industry.

Short-Term Loans in a Nutshell

In the first place, let’s talk about these money offerings at all. Typically, a short-term loan is a lump sum provided to a borrower with a repayment term of 3 to 18 months. The amount may vary between $100 and $100,000, and interest rates can also be extremely different. Payday loans and offers from loan sharks feature predatory rates up to 10,000% while legit personal offers come with 8.5% to 80% annual percentage rates.

Short-term loans include various subtypes besides payday loans. Customers can access lines of credit, cash advances, small business loans, and more. Modern lenders accept requests both offline and online.

Moreover, we want to discuss a few features of loans.

Short VS Long

When comparing to traditional medium-term and long-term packages, borrowers should look at four points:
  • Time. 1 or less to 18 months for short loans compared to 2 to 20 years for long ones. Some long loans also come with a flexible repayment schedule that doesn’t specify the term.
  • Eligibility. Lower requirements, such as no credit checks, compare to higher limits for larger offers. They include income proofs, good credit history, and other papers.
  • Amount. $100 to $250,000 for short term compared to up to $5 million for the long term. Businesses may receive more than individuals.
  • Rate. Legal rates are up to 80% APR for short loans and as low as 5% for long ones. However, borrowers pay less in total interest when they repay faster.

Pros and Cons

As for advantages, short-term offers come with the next benefits:
  • Favorable acquiring requirements.
  • Lower total interest payments.
  • Quick approval and delivery time.
On the contrary, they also have some drawbacks:
  • Potential scams and loan sharks.
  • Relatively small amounts.
  • Way higher interest percentage.

Trends of the Short-Term Loans Niche for 2024

Moving to the market direction, it’s important to understand that different regions feature different trends. By analyzing reports from the United Kingdom, the USA, and South Africa, we can distinguish global trends.

1. Banks Rule the Game

In the US, large banking organizations received 25% of small business loan requests in 2017. Moreover, they doubled the approval rate since 2011. In other countries, people also tend to contact banks more often because of better regulation and more guarantees. It’s quite logical as reputable finance companies often try to help customers, especially, debtors.

Another side of the increasing popularity of bank short-term loans leads to higher competition between these enterprises. Thus, people can expect lower fees. In South Africa, this trend is emerging right now. Despite it begins at the market of savings and deposits, loans also may come with lowered interest rates later.

2. Loan Amounts and Volumes Rise

The United Kingdom reports that 2018 was the most successful year for loaning institutions since 2016. There were almost 1.5 million loans approved with a total value of £338,179 in Q2 2018. The same period showed the total payable amount of £564,056. Means, clients repay 1.65 times more than they get. Similarly, South Africa reveals that transactions increase as people focus on legit banking loans instead of unrecorded underground borrowing.

3. Number of Firms Go Down

Simultaneously, three reviewed areas feature a decreasing number of lending companies and non-banking groups that provide short-term credits. Here are actual stats:
  • The United Kingdom: in Q2 2018, there were 88 firms in comparison with 97 a year ago and 106 in Q3 2016.
  • The USA: alternative lenders like Lending Club and CAN Capital fail to compete with tech-savvy and customer-oriented banks.
  • South Africa: the number of unregulated loan sharks and lending companies decreases because of new laws.
As a result, we see that market share moves towards institutions and banks while other lenders lose clients.

4. Percentage of Credits in Good Standing Increase

South Africa also mentions that the percentage of successful credits with regular repayments was the highest in Q1 2017, compared to the last four years. This trend also refers to better control over this market. Unregulated microfinancing groups still dominate in other countries with poor economies like Bangladesh and Russia. However, we expect to see stricter regulation all around the globe soon.

Potential Changes

Concluding all trends, we can say that the market for short-term loans faces more regulative measures and fights illegal actions. As a result, people tend to borrow more and repay regularly. Short offers seem to be highly popular for a long time because of their convenience and affordability. But only time can prove these statements.