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When it might be time to consider a short term loan

Written by Posted On Thursday, 05 April 2018 23:10

You’ve got two weeks until payday and you feel confident that your budget is in order. That’s until your dog decides to eat your secret chocolate stash and costs you and arm and a leg in vet bills. The trouble is, your savings already took a hit two months ago when you treated yourself to a well-deserved holiday and you haven’t quite finished reading the Barefoot Investor. Is it time to consider a short term loan?

Yes, yes, we know they get a bad rap. Short term loans are all over the news and not usually for a good reason. However, sometimes you’re in a jam, and as long as you are super sensible then they can help you out of a tight spot.

What is a short term loan

A short term loan is usually between $100 and $10,000 and come with a short payment period, meaning you’ll limit the interest rate and fees you pay. The term of the loan can last anywhere between 16 days to a year and they’re generally easier to be approved for, even people with bad credit can have access to them.

When is it a good time to get a short term loan?

There really is no blanket answer. As with anything, it depends on your individual circumstances. The fees associated with them can make them an expensive way of getting hold of finances quickly. It’s worth thinking about all the options you have available such as credit cards, personal loans, or an approved overdraft. However, these are not as quick as a short term loan, so if time’s your driving factor, they probably are a leading option.

We’re human and things happen. Unexpected costs that can’t always be budgeted for. Hospital bills, car repairs, vet bills (pesky dog and his chocolate addiction), and when they do, a short term loan is the easiest way to get money, quickly.

The most important thing to remember is that you also have to pay it back quickly and this is where it can get people in trouble. A cycle of getting loans to pay back loans is never a good position to be in. Therefore, if you’re thinking about applying for one, ask yourself is this for convenience or desperation and can I pay it back without causing myself more financial strife? The less sombre news is that as borrowers we are protected. Lenders have responsibilities and obligations and ASIC have been known to force them to pay back customers if they’re in breach of policies.

When to apply and when to walk away

As long as you understand your own finances and can include repayments in your monthly budget, you should be able to work out your repayments and stay living within your means. Not everyone has huge amounts of savings so they are a viable way to get your hands on cash, fast.

You should look for alternative options if you’re searching for a cash to pay recurring bills such as rent or bills. Using a short term loan to cover these will more than likely put you in a precarious situation. If you are experiencing financial difficulties and finding it hard to pay day-to-day expenses, you should talk to your bank or service provider. They’ll be able to work out a payment plan with you. Getting a short term loan is definitely not the answer.

Article provided by Club Money

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