When you find yourself in need of something that you can’t afford to pay cash for, short-term loans can be beneficial. Unlike traditional bank loans which can be difficult to qualify for, short-term loans have few eligibility requirements, is easy to apply for, and can be received in just a few business days. As with anything financial source you borrow from, the trick is knowing how to use it to your advantage.
Only Borrow When Necessary
Short-term loans typically must be paid back in less than a year. With such a short timeframe, you don’t want to borrow on impulse but borrow because you’re in need. Taking out a loan that has to be repaid in 6 months to a year to pay for an impulsive purchase isn’t wise spending. However, a short-term loan can be great if you have a home repair that can’t be put off, a shutoff notice on a utility bill, a repair on your old car, to cover medical expenses, or to tide you over between paychecks.
Choose Your Lender Wisely
There are literally thousands of online short-term lenders you can borrow from, but they’re not all created equally. Unfortunately, there are a lot of scams out there associated with short-term loans. Not to mention, each provider charges different interest rates, fees, and provides different repayment options.
To use this loan to your advantage, you want to choose a reputable lender that offers the most affordable rates, the fewest fees, and flexible repayment plans that fit with your budget. You can start by researching lenders online. Then review complaint boards and the Better Business Bureau to ensure they are legit and that there aren’t too many dissatisfied customers out there. After finding at least three legitimate companies, compare their services, rates, and eligibility requirements to determine which is best suited for you.
Be Sure You Can Repay It
A huge problem that people make when taking out short-term loans is not taking the time to determine how they will pay it back. They’re so busy focused on their immediate need that they forget they will have to make payments over the next few weeks or months. As such, they end up falling behind on their payments and incur more fees and interest which essentially accumulates more debt.
Before taking out a loan of any kind, make sure you can repay it. You can do this by evaluating your household budget to see how much money you have left after paying your regular bills. You can also consider cutting back on nonessential expenses like eating out or entertainment until you’ve paid the loan off. By no means whatsoever should you borrow money that will disrupt your finances to repay. If you really need the cash you can borrow an amount you can afford or look to other funding sources.
Pay On Time (Or in Advance if You Can)
The longer you take to repay a short-term loan the more it costs you in interest and fees. Skipping payments, extending your repayment plan, or paying after the date it’s due can cause financial strain. If the funds aren’t in your checking account you incur an insufficient funds fee from your bank, you’re charged a bounced check fee by the lender, and you accrue more interest and penalties.
Before signing your short-term loan agreement, review the repayment plan to ensure it will work with your pay schedule and budget. If it doesn’t talk with the representative to find out if you can rearrange your due dates to make it more accommodating. You can set reminders or automatic deposits to ensure the money is in your account on the day it is due. If you can pay in advance, however, this would be your best bet as you reduce the amount of interest you repay.
Short-term loans can be convenient financial resources for individuals who are in a jam and need immediate assistance. Most have minimal eligibility requirements, they don’t check your credit, and they offer several options to repay. It can help you to cover those unexpected expenses without completing ruining your budget. In order to take advantage of such an opportunity, however, it is important that you use the advice listed above.
