Short term loans is a convenient way to get money when you need it quickly. Based on your credit history and financial situation, you can secure a short term loan within minutes and have the money in your account the same day. What you need to know is that there are a number of advantages and disadvantages to short term loans. So before you rush out and sign up with the first lender, ensure you know what you are getting yourself into.
If you have a sound financial budget, it can go a long way to improve your chances of short term loan approval. But the risks don’t just vanish. Here is a list of some of the top advantages and disadvantages to short term loans you need to know.
The first advantage to short term loans is how easy they are to apply for. Most lenders offer their application form on line. Short term loans are small loans that are taken for a short period of time. This means the lender doesn’t need as much information as they would if you were taking out a longer term loan.
This means a faster loan processing time and you can usually get an answer within minutes, rather than meeting with the bank manager and waiting nail-biting days waiting to here if you have been approved or not. In addition to this, you don’t have to wait long for the funds to be deposited into your bank account.
Poor Credit Histories Are Also Considered
Many of the short term loan lenders don’t require on a credit rating to approve your application. You may have experienced difficulties in the past and ended up with a poor rating, but this doesn’t instantly disqualify you from this type of loan. Even with poor credit ratings, you can secure a short term loan, though you need to ensure that you are in a position to repay the loan in a timely manner.
Money Often Deposited Within 24 Hours
One of the many advantages of short term loans is how quickly you can secure the money you need. Short term loans are designed as emergency loans. Remember this is money borrowed that you pay back quickly, usually within a few months. The full repayment is always under a year. Most lenders will deposit approved loans the same day or the next day, so you can get the money you need without delay.
This is a tricky one that can be an advantage or disadvantage of short term loans. Some lenders are happy to enable you to repay the loan quicker than originally agreed, reducing the interest payable. Others, on the other hand, may charge a penalty if you repay early. It is important to read the loan agreement carefully to see whether making larger repayments and paying off quicker will benefit you in the long run.
Build Your Credit Rating
If you are struggling to get your credit rating up, then taking out a short term loan can be beneficial to your credit score. If you repay on time and pay back the loan in a timely manner without missing payments or any late payments, it can improve your credit rating.
Massive Debt Potential
One of the major disadvantages of short term loans is their potential for massive debt. When you take out one of these loans, they are for a short period, which means high interest and high repayment amounts. Getting caught in a debt cycle where you cannot make repayments puts you at risk of digging yourself deeper into debt.
No Time to Waste
Choosing a short term loan must be done with great care, as you need to make the repayments consistently and quickly. This increases your financial pressures and it’s imperative your repayments are made on time. Missing or being late on a repayment can result in penalties, incurred fees and it can ruin your financial situation.
Higher Interest Rates
Short term loans are quick and easy, they are designed to provide you with cash in emergencies, as a result they come with high interest rates. This means that you are likely to pay more each month than you would if you took out a longer term loan.