Wednesday, December 21, 2016
Get Shorty: Benefits Of A Short-Term Loan
Getting a loan is something that is not to be taken lightly. It is, in many ways, both a blessing and a curse. Whether you need a home loan or you need to pay off some debt that has been hanging over your head for some time, having a financial injection in one go can take a lot of worries off your mind. Short-term loans are very helpful, but what are the pros and cons?
They Are Very Convenient
Paying off something like a credit card or an electric bill with a short-term loan is very handy. Even businesses use this method if they cannot cover their overheads.
The Impact On Your Credit Score Is Insignificant
The normal process when you have to borrow money, you will need to have your credit score checked. And it is a very difficult part of the whole money borrowing process, because if your credit score is not very good, not only will you be declined for the loan, but because you have had your score checked, that makes a negative impact on your score and ability to secure a loan in the future. With a short-term loan, the impact is a lot less, but it doesn’t hurt to get a free credit report beforehand.
It Is Very Flexible
Any loan can weigh heavy on your head, and if you have obtained a large one it is very difficult to try and pay it off in one lump sum. Shorter loans are perfect for this, and there is more flexibility in paying back the money.
The Interest Rates Are Higher
Due to the shorter time period, the lender of the loan will be asking for a much higher rate of interest. But, even though the rate is higher, the amount that you would pay in total is very likely to be less in comparison to what you would borrow over the long term. So, it begs the question, what do you need the money for? Is it feasible to pay it back quickly?
The Loan Cycle...
It is such an easy habit to get into. Getting a short-term loan to pay off debt, and then getting another one to pay off that loan, and it can go on and on. The issue with shorter loans is that they are almost too convenient a habit. You might be better thinking about planning your finances more appropriately rather than getting into a whole heap of debt.
Do you need the loan? It is sometimes a lot easier to get an extension on your bank overdraft, which is a temporary solution without the repercussions that can come with getting a loan. Of course, it is all dependant on the bank that you are with and their own criteria, but it may be a short-term solution that will better benefit you in the long run.
Be sure to weigh up what you need. Short-term loans are a great option if you have the means to repay it quickly, but the heap of debt that you can get into may be more than you can stomach.