Short term private loans provide fast funding for urgent, temporary needs with repayment terms of 1-12 months.
What Are Short Term Private Loans?
Short term private loans are loans with terms of 1-12 months (sometimes up to 24 months), designed for temporary funding needs with quick exit strategy.
Typical terms:
- 1-3 months: Ultra-short
- 3-6 months: Short-term
- 6-12 months: Medium short-term
- 12-24 months: Extended short-term
Types of Short Term Private Loans
1. Caveat Loans
Term: 1-12 months Rate: 2-4% per month (24-48% p.a.) Security: Property caveat Speed: 24-48 hours possible Best for: Urgent property-backed needs
2. Bridging Loans
Term: 3-24 months Rate: 1.5-3% per month Use: Property transactions Best for: Buy before sell
3. Short Term Business Loans
Term: 3-12 months Rate: 1-3% per month Use: Working capital, inventory Best for: Seasonal businesses
4. Personal Short Term Loans
Term: 1-6 months Rate: 15-35% p.a. Security: Usually unsecured Best for: Emergency personal expenses
Short Term Loan Rates
By type:
- Caveat (property-secured): 2-4% per month (24-48% p.a.)
- Bridging: 1.5-3% per month (18-36% p.a.)
- Business (secured): 12-24% p.a.
- Personal (unsecured): 15-35% p.a.
Why so high?
- Short term = higher monthly rate
- Setup costs same regardless of term
- Higher risk (urgent needs often = desperation)
- Lender wants meaningful return quickly
Example: $50,000 for 6 Months
Caveat @ 2.5% per month:
- Monthly interest: $1,250
- 6 months: $7,500 total interest
- Effective rate: 30% p.a.
Bridging @ 1.8% per month:
- Monthly interest: $900
- 6 months: $5,400 total interest
- Effective rate: 21.6% p.a.
Personal @ 24% p.a.:
- 6 months interest: $6,000
- Similar cost to caveat but no property required
When to Use Short Term Loans
Perfect for: ✅ Settlement shortfall (property purchase) ✅ Auction deposit (won property) ✅ Temporary cash flow gap ✅ Awaiting property sale proceeds ✅ Business seasonal needs ✅ Tax payment (ATO debt) ✅ Bridge to long-term financing ✅ Urgent business opportunity
Avoid for: Long-term needs (use longer-term loan) No clear repayment source Ongoing expenses (not one-off) Speculative investments
Exit Strategies
Must have clear exit plan:
1. Property Sale
- Selling property in 3-6 months
- Proceeds repay loan
- Common for bridging
2. Refinance
- Fix credit/income issue
- Qualify for bank loan
- Refinance to lower rate
3. Business Income
- Seasonal business revenue
- Contract payment due
- Invoice payment
4. Sale of Asset
- Equipment sale
- Investment sale
- Business sale
5. Tax Refund
- Tax return expected
- Government payment
- Settlement proceeds
Requirements
Secured Short Term: ✅ Property equity ✅ Clear exit strategy ✅ Ability to pay interest
Unsecured Short Term: ✅ Regular income ✅ Good credit (generally) ✅ Repayment capacity
Repayment Options
Interest-Only Most Common:
- Pay interest monthly
- Principal due at end
- Example: $100k loan, $2,000/month interest, $100k balloon
Principal & Interest:
- Less common for short-term
- Higher monthly payments
- Fully repaid at end
Deferred Interest:
- Some lenders capitalize interest
- Pay nothing monthly
- All due at end (interest compounds)
Advantages
Benefits:
- Fast approval (24-48 hours possible)
- Solve urgent problems
- Keep long-term borrowing separate
- Short commitment
Disadvantages
Drawbacks:
- Very expensive (24-48% p.a. common)
- High monthly interest payments
- Pressure to exit quickly
- Can be hard to refinance out
Example Scenarios
Scenario 1: Auction Deposit
- Won auction Saturday
- Need $100,000 deposit by Monday
- Caveat loan: $100,000 @ 2.5% monthly, 3 months
- Property settles, loan repaid
- Cost: $7,500 but secured the $850,000 property
Scenario 2: Business Tax Debt
- $50,000 ATO debt
- Penalty interest 9% p.a.
- Private loan: $50,000 @ 18% p.a., 6 months
- Refinance to cheaper bank loan after 6 months
- Cost: $4,500 but avoided ATO penalties and potential garnishee
Scenario 3: Settlement Shortfall
- Property settlement tomorrow
- Buyer's sale delayed 60 days
- Bridge: $200,000 @ 1.8% monthly, 2 months
- Cost: $7,200
- Alternative: Lose $20,000 deposit and dream home
Calculation: Worth the cost?
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