Short Term Loans
Advantages and Disadvantages of Short Term Loans
When you are looking for short term loans, payday loans are often the consideration. However, there are a number of advantages and disadvantages to taking out these loans and you should always consider them before you sign on the dotted line.
The first advantage of opting for short term loans is that there are often no credit checks in place. This will mean that anybody can be accepted to borrow the money. The lenders will be putting themselves at a high risk so the APR tends to be very high. However, it makes no sense to take out a high interest short term loan when you could accept the fees for going over your overdraft. Because of this, the first month of short terms loans usually has a basic fee, which is a small amount; if you do not pay the money back on time, you will have to pay the APR instead.
There are usually conditions set so that you can take out the short term loans since the lenders like to know that they are going to get their money back. These conditions change between companies so you will need to do a search for the best company for you. However, the most common conditions are that you are over 18 and that you earn a set amount, usually £750, per month. This will help to see if you can afford to pay the money back that you borrow.
Another advantage is that you will get the short term loans quickly. There are some companies that will be able to put the money in your bank within an hour of apply, no matter what day of the week or time of the day you apply. This is because the checks on your financial situation are done there and then, without the need to fax any details to them. These companies are worth the consideration if you need the money quickly but only if your bank allows the quick money transfers.
Short term loans really can help you to bridge the gap between paydays and there is no need to declare what you need the money for. You can use it to treat yourself at the end of the month or you can use it to pay that debt off that has been hanging over your head for a while. While you are bridging this gap, you can also improve your credit rating; you are proving that you are a sensible lender so more lenders are willing to lend to you.
However, the short term loans are just for the short term and you cannot use them as a way to help get out of debt. They are not debt consolidation loans and if you use them that will, you will end up paying a lot of money back and will find that you suffer more on your credit rating.
It can be tempting to rely on short term loans every month but they should not be used for budgeting. They can harm your rating if you constantly rely on them because you will come across as irresponsible financially, which makes you a high risk.