Minor cash problems accompany us all life long, whether it’s a car repair, medical expense, or a job loss. No matter how stressful they are, you still need to tide them over whatever it takes.
Many Americans usually count on short-term loans when an emergency happens out of the blue. When you need fast money, and your credit rating is not good enough to apply for traditional loans, a short-term loan can be a lifesaver.
Short-term Loans Explained
A short-term loan is a type of financing with the tenor range of less than one year. As a rule, short-term loans are obtained to cope with a temporary financial hardship until the next payday. Usually, short-term loans come with a relatively small amount, up to $2500, depending on your eligibility. Unlike traditional credit tools, these loans must be paid off in a lump sum payment.
Emergency funds are available to get directly from online or in-store lenders. Most lenders apply no hard credit checks when assessing your creditworthiness. Thus, these loans are a good fix for those whose credit score is less than excellent.
Advantages of Short-Term Loans
There are too many advantages in getting a short-term or a so-called payday loan, but the most iconic ones are as follows:
Save a Lot of Interest over the Life of the Loan
Unlike long-term loans, payday advances need to be paid back in less than a year; consequently, you will pay for interest significantly less.
Easy-To-Apply Requirements
Borrowers of short-term loans may be considered less risky than those who apply for long-term debts. Theoretically, it’s less likely that the borrower’s credibility can be changed considerably during a short period than over a long frame of time. Thus, cash lenders apply softer eligibility requirements to prevent the risk of default.
Quick Funding
Usually, short-term lenders don’t require hard credit pulls (checks) to qualify you for the credit, plus they don’t ask for collateral. Altogether, it makes the lending process smoother & quicker, and you don’t have to wait for your cash for weeks.
Disadvantage
Actually, if it can be considered so, the main disadvantage is the small amount of a loan. However, on the other side, it comes from the essence of the credit tool, as short-term loans are deemed to be a small borrowing.
Key Takeaways
Considering short-term loans as a quick emergency relief, you need to clearly understand what these loans are designed for. Therefore, it is wise to opt for a short-term loan only if you are sure that you can handle a debt repayment in full until your next paycheck. Otherwise, you may find yourself in a worse spot, than you were before.