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Short Term Loans Can Be Good Or Evil

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4 years ago

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Any amount of money or material you borrow which you agree to return within a short period of time can be called a “short term loan”. But in Financing parlance, Short Term Loan[1) refers to:

  1. A type of financial assistance granted by a legitimate lending company like a bank or a finance company which is payable within 1 to 2 years; few lenders grant 2-year short term loans and considerations before taking one.
  2. The loan amount is usually less than the amount granted under medium and long term loans. Most short term loans do not exceed the average monthly pay of employed borrowers or the maximum monthly receivables of businessmen borrowers.

Lenders use your debt-to-income ratio’, which equals your total monthly debt payments divided by your gross monthly income to determine your loan entitlement amount.

  1. Short Term loans bear Higher Annual Percentage Rate (APR), usually this is allowed by law because such loans aren’t guaranteed by hard collateral like real estate properties or chattel.
  2. Short Term loans are called Unsecured Loans’ because borrowers’ credit limits are not based on collaterals but on credit worthiness and income. This is one main reason why repayment period is relatively short and done in installments.
  3. The principal and the interest on the loan must be repaid in full within the term of the loan in accordance with the amortization schedule usually weekly/monthly or on the due date.
  4. Most lenders set high eligibility criteria when evaluating first time applicants. They evaluate your:
  • Credit score-You are entitled to a free Score from government-endorsed credit bureaus.
  • Current income and Expenses-To be discussed with lender’s Loan Processor,
  • Employment/Business history-You prepare it.
  • Equated monthly installment-The lender determines this.
  • Repayment history. To be checked by Loan Officer.
  1. But lenders usually are lenient on valued businessmen-regular clients who require limited operating capital to replace delayed collections and employees who could present lenders’ valued clients as guarantors or co-makers.

Short term loans must be distinguished according to purpose to identify applicable requirements. The 2 categories according to purpose are:

  1. Business Loan-Loans to support existing business operations like emergency purchases, payment of related bills fall under this category.
  2. Personal Loan- This includes all loans to finance the acquisition of materials or implementation of activities not related to business.

To apply for a short term loan, you must be of legal age, not a subject of imminent legal or physical disability and be able to submit the applicable requirements [12]:

  1. Business Loan- 1 to 6
  2. Personal Loan- 1 to 4
  3. Proof of identity of the loan applicant (Passport. Voter’s ID or Driver’s License) and 2 passport size photos
  4. Proof of Residence (Passport, iRation card, telephone bill, electricity bill)
  5. Bank Account Passbook or bank statement
  6. Most Recent Income Tax Returns
  7. Balance Sheet and Profit and Loss Statement-certified by a Chartered Accountant
  8. Current Trade licenses/Establishment/Sales Tax Certificate for the Proof of Continuation of his profession

Here are 6 Types of Short Term Loans[13]:

  1. The Credit Line – This is for merchants with brisk commodity turn-over.. The bank grants you a credit limit which you can request to be given in one full release and have it be deposited in your savings-checking account; you withdraw only every time you need cash. You can also apply for staggered release where you can withdraw only when you need cash. The drawback of full release is that you pay interest on the full loan principal part of which you don’t utilize; but you can take it out anytime without applying for release.
  2. Fixed-Term Bank Loans-This is a single release loan which you will pay at the fixed due date. The interest may either be discounted upon release or added on the principal at due date. You may renew this loan before its due date to make it current should you wish to delay extend your use of the loan.
  3. The Bank Overdraft facility is a type of credit line that banks give to valued clients. This is linked to your existing Checking Account. In the event that you issue a check not fully covered by funds, the bank automatically cover the insufficiency and charge interest according to the loan agreement
  4. Merchant Cash Advances is for wholesalers which accept credit card/debit card payments. The bank advances a lump sum amount to the merchant. This cash advance is subsequently paid by the merchant daily to the bank from the proceeds of his receivables. The bank requires the merchant to link the bank to PayPal or Visa to have access to the merchant’s collections.
  5. Invoice Financing or Receivables Financing is similar to merchant cash advance financing. Here, the merchant pledges his receivables-as shown by invoices of goods sold on credit- as a guarantee for a short term loan..
  6. Payday Loans is for people who rely on fixed and regular income from employment or small business. Repayment here is guaranteed because the lenders are much more willing to renew defaulting borrowers until the loans are fully paid.

Generally, the short term loans seem to be advantageous to borrowers because:

  1. The release of loan proceeds is fast.
  2. The requirements are lenient compared to medium or long term loans.
  3. Renewing defaulting loans is allowed thereby giving borrowers breathing space to pay their obligations and maintain a good credit score.
  4. The amount granted is small thereby giving small borrowers chance to obtain cash for emergency purposes.

But short term loans are more advantageous to lenders because:

  1. Due to the short duration of payment schedule, lenders’ capital turn-over is fast thereby giving them a chance to earn more.
  2. The borrowers virtually come under the lenders’ control once they default in payment; the lenders would be continuously earning at the expense of the borrowers. Unless defaulting borrowers go absolutely bankrupt or permanently disappear, lenders can resort to court remedies to collect

Short term loans have advantages and disadvantages depending on where you are in relation to them.

  1. https://www.finimpact.com/short-term-loans/
  2. https://quickbooks.intuit.com/in/resources/money-finance/the-essential-documents-for-applying-for-a-loan/
  3. https://corporatefinanceinstitute.com/resources/knowledge/finance/short-term-loan/
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Celebrating 25 Years: Otumfuo Osei Tutu II’s Reign

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6 hours ago

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April 26, 2024

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Celebrating 25 Years: Otumfuo Osei Tutu II's Reign

Today marks the 25th anniversary of Otumfuo Osei Tutu II’s reign as the Asantehene, the King of the Ashanti Kingdom.

The celebrations, which began with spectacular fireworks witnessed by Otumfuo himself, will culminate in the Silver Jubilee anniversary on Akwasidaekese on June 12 at Dwabrem, Manhyia Palace.

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This milestone is a testament to Otumfuo’s impactful leadership, dedication to the Asante people, and contributions to education and research as the Chancellor of KNUST.

The event is being celebrated across Ghana, with well-wishes and congratulations pouring in from various quarters, highlighting the significance of this occasion for Asanteman and Ghana as a whole.

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Mr. Beast in Ghana: Surprising Visit Sparks Excitement

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7 hours ago

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April 26, 2024

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Mr. Beast

World-renowned YouTuber Mr. Beast, known for his philanthropic acts, has been spotted in Ghana, specifically in Accra and Tema, sparking excitement among locals.

His visit has led to discussions about his choice of Ghana over other African countries, with some suggesting that the country’s popularity as a tourist destination played a role.

Mr. Beast’s presence in Ghana is part of his global outreach, as he recently gifted a Ghanaian $25,000 as part of his X (Twitter) giveaway.

Read Also: Producers of 'Beast of No Nation' return to filming in Ghana, causing upset in parliament

The YouTuber has been seen exploring the country and interacting with locals, with many expressing their desire to meet him and participate in his charitable endeavors.

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People & Lifestyle

Stephen Appiah to contest John Dumelo and Lydia Alhassan in MP race for Ayawaso West Wuogon

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7 hours ago

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April 26, 2024

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Stephen Appiah to contest John Dumelo and Lydia Alhassan

Former Black Stars captain Stephen Appiah is set to enter the political fray by rubbing shoulders with notable personalities in the upcoming general elections.

The former Juventus midfielder is believed to be lacing his boots to face the likes of John Dumelo and the incumbent member of Parliament for the Ayawaso West Wuogon Constituency Lydia Alhassan.

While Dumelo and Alhassan represents the NDC and NPP respectively, Appiah is expected feature in the elections as an independent candidate.

This was revealed by the Spokesperson of the Ayew family Fiifi Tackie via X on Friday afternoon.

“Stephen Appiah to contest Ayawaso West Wuogon constituency as an independent Parliamentary candidate,” he wrote.

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If Stephen Appiah affirms the reported news, he will be following in the footsteps of other renowned figures in Ghana football who have indulged in politics recently.

Earlier this year, all-time top scorer of the Black Stars Asamoah Gyan was appointed as the sub-committee chair of Youth and Sports in the campaign committee of Dr Bawumia, the flagbearer of the ruling New Patriotic Party.

In acceptance of the appointment, Gyan emphasised the need to share hos ideas garnered through experience in the game.

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“I always ask myself, how do we create change if we don’t want to change? How do we spectate without being on the bench, and how do we score without being on the field?… All I know and will ever know, all I love and will ever love is SPORTS.” he stated.

Another figure in Ghana football who recently announced his intention to engage in partisan politics is Kwesi Nyantakyi, former Ghana Football Association (GFA).

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The former football administrator showed up as one of the candidates to contest in the NPP primaries for the Ejisu constituency following the demise of incumbent John Kumah.

However, it didn’t pan out well for the former Wa All Stars owner as he lost disappointingly.

He garnered a paltry 35 votes after close to 1,081 delegates had cast their votes in the parliamentary primary of the New Patriotic Party (NPP) held in the Ejisu Constituency on April 13.

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Rebecca Osam: A Champion for Women’s Empowerment in Africa

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April 26, 2024

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In a heartfelt social media post, Rebecca Osam, Managing Director of Reflo Company Limited, Reflo’s TV, and Femme Fatale Productions Limited, has pledged her full commitment to empowering young women.

Rebecca expressed her desire to move beyond mere inspiration and instead build a deeper connection with young women, offering guidance and support to help them achieve their goals.

Her passion for women’s empowerment stems from her experiences growing up in Africa, where she witnessed firsthand the oppression and lack of opportunities faced by women. This drove her to co-found The Florence Mensah Foundation with her mother, aiming to empower African women and girls, and encourage them to recognise their worth, strength, and potential.

Through her foundation and personal endeavors, Rebecca seeks to provide a supportive platform for young women to thrive. She aims to be a relatable figure, offering mentorship and encouragement to help them overcome challenges and achieve success on their own terms.

Rebecca’s dedication to empowering young women proves her leadership and commitment to creating positive change in her community. Her efforts serve as an inspiration to others, highlighting the impact one person can have in driving gender equality and women’s empowerment.

As Rebecca continues her work, her message resonates with young women across Africa: “Anything is possible, and I am here to support and cheer you on every step of the way.”

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Caradise Ghana Car Rental Facilitates Transportation for Global Christian Forum held in Accra

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8 hours ago

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April 26, 2024

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Caradise Ghana Car Rental has once again successfully facilitated the transportation of over 240 participants from 60 countries across the globe for the recently ended Global Christian Forum in Accra, Ghana.

Numerous buses hauled the various participants from the Airport to their designated hotels from the 12th to 15th of April, 2024. Participants were then transported from their hotels to the conference grounds daily for the gathering of devoted Christians from the 16th to the 19th of April, 2024.

The forum began with a vibrant, joyful worship service held at Accra Ridge Church. The Rev. Dr. Casely Essamuah welcomed participants to Ghana and to the Fourth Global Gathering, and participants spent the day sharing their faith stories with one another across the litany of differences represented. 

The forum was climaxed with a dinner and 25th anniversary celebration at the Action Chapel Internation Church hosted by Archbishop Nicholas Duncan-Williams.

After the forum, the participants took the opportunity to visit the Kwame Nkrumah Memorial Park and Mausoleum where they learnt about the great Pan-Africanist, Osagyefo Dr. Kwame Nkrumah and Ghana’s journey to inpendence.

The participants also spent a day in Cape Coast where they learnt about the millions of enslaved, dehumanised African men, women, and children at the Cape Coast Castle. Witnessing first hand how Africans were forcibly taken captive to the Americas, Caribbean, and Europe as objects of lucrative trade.

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DJ Khaled Announces Second Annual We The Best Foundation Golf Classic On June 12 & 13 in Miami Beach !

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9 hours ago

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April 26, 2024

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GRAMMY® Award-winning, global megastar DJ Khaled proudly announces the return of his annual WE THE BEST FOUNDATION GOLF CLASSIC for the second year in a row.

For 2024, the mega-popular charity event expands to two days on Wednesday June 12 and Thursday June 13 in Miami, FL. Given the demand by countless superstar artists, A-list athletes, and entertainers to participate, he needed to stretch the proceedings over two days!

Once again, the event will be sponsored by Jordan Brand, and all proceeds support the We The Best Foundationand its numerous efforts to bolster education. Stay tuned for the multitude of exciting confirmed guests, and more.

Khaled created a cultural groundswell and personally appeared on ESPN’s SPORTSCENTER to break the news of the second installment of the WE THE BEST FOUNDATION GOLF CLASSIC today. Watch HERE.

Regarding the return of the WE THE BEST FOUNDATION GOLF CLASSIC, he commented, “Last year, the WE THE BEST FOUNDATION GOLF CLASSIC brought out so many friends and family to make a difference, play some great golf, and have an incredible day for a great cause. This year, we’re going even bigger, and we thank everyone for their continued support. TEE UP AND BLESS UP!”

Last year, the inaugural WE THE BEST FOUNDATION GOLF CLASSIC hosted Serena Williams, pro golfers Michael Block and Bubba Watson, Odell Beckham, JR., Shannon Sharpe, Victor Cruz, Jalen Rose, Terrell Owens, Marcus Jordan, Jeezy, Quavo, The-Dream, Swizz Beatz, Timbaland, Fat Joe, Cedric The Entertainer, Joey Fatone, and more. The foundation raised over $500,000 which benefited the enrichment of children and youth through educational programming, scholarships, and extracurricular activities.

More guests and partners for 2024 will be unveiled soon.

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