When you're suddenly short on funds, it could mean trouble. Your budget may not cover all the bills you have to pay. If you're a business owner, your company might struggle for a bit until you start seeing sales coming your way. Luckily for you, you can apply for short term loans. But before you consider it, here are some pros and cons you need to weigh:
Easy and Hassle-Free Process
Banks and other large money lending institutions make it hard for people to get a loan from them. If you've experienced that struggle and aren't too enthusiastic to try it again, you can opt to apply for a short term loan.
The approval process of short term loans is quick because you can do it online. You don't have to go to the place itself to get approval physically. You won't even have to bring in lots of legal documents unlike when you apply in banks. A few clicks on your computer or smartphone and you could get the money within a few days or on the same day.
No Problem If You Have Bad Credit
Having bad credit is a huge factor that increases the risk of your loan getting rejected by banks. It's because they always check your credit score before approving your loan, and if they see that you have a bad credit history, there's a high chance you will end up with nothing.
Those who offer short term loans take more risks regarding the people who borrow from them. Even if you have bad credit, you still have a chance at getting approved. It's because they will also look at your other assets. It's their measure of precaution to put both parties in a less risky situation.
Available At A Time When You're Most In Need
Financial struggles can spring on you suddenly, which could put you in a difficult situation. Let's say you got into medical school and was eligible for a scholarship, but even with the financial help, you're still a bit short on other miscellaneous fees plus budget for boarding, food, and everything else.
When you find yourself in a bind, a short term loan could save you. The quick application process can put money in your pockets as soon as you need them. Therefore, you won't have to miss opportunities anymore just because you're short on funds.
High Interest Rate
Short term loans have higher interest rates than long term loans. The quick and easy approval process may slash your struggle, but you'll pay for it in terms of a bigger interest rate. Over time, the total amount you pay is much higher than what you initially borrowed.
It's understandable that short term loans operate like this because they take a higher risk than banks and other large money lending institutions. Your payments wouldn't lessen over time; instead, they will remain constant at a high rate.
Most banks and large money lending institutions require you to pay every month. So, if you have a stable monthly income, you'll cut that budget to pay every month for a long term loan. However, for short term loans, you're required to pay frequently.
Short term loan lenders usually ask for a daily or weekly payment. It's because payments are only doled out for about 6 to 12 months. It could cut out a massive chunk of your monthly income, which means you have to manage your finances more carefully than before.
You Could Get Stuck In A Loop
A financial crisis is something people would never want to experience. But no matter how much you try to avoid it, circumstances could arise that will put a dent on your budget. If it happens, then you'll be forced to get a loan if you can't borrow from family or friends.
When you get a loan, it could solve your problems at the moment. However, that little breathing space won't last because you'll have to face the fact that you have to pay it back, and you'll be paying more than what you initially borrowed. If you can't pay it back, then you might seek out another loan to pay it, which could then turn into a debt loop.
When you find yourself struggling financially, you can try applying for a short term loan if you urgently need the money. Banks will give you a hard time before you get approval for your loan. If you don't need too much and would prefer to complete the payment much faster, go for the short term. Just be sure to weigh in the pros and cons before making up your mind.