There may come the point when you need money right now. You can’t wait until your next paycheque. Whether it be for an emergency or to pay for something important, what do you do if you need money quickly?
One option is to apply for a short-term loan. These loans allow you to access funds almost instantly. They are typically for smaller amounts, and you pay them back earlier than a standard loan. You do not require collateral to back up the loan, which makes it a lot easier to apply for them.
One thing to consider before applying for a short-term loan is the interest rates. These rates mean the repayment fees tend to be quite high. Potentially higher than your average bank loan. There may also be other fees attached to the loan. So, if you want to utilize this option, you should ensure you can pay the loan back so the interest doesn’t build up.
If you are considering a short term loan below are a few reasons most people take them out.
You Have an Emergency
Emergencies are one of the primary reasons for accessing a short-term loan. That is because an emergency typically catches people off guard. Whether it be for personal or business purposes, an emergency can cause a difficult financial situation when cashflow is tight.
By using quick loans, you can get the money you need right away and pay your unexpected expense.
You Have Bad Credit
Bad credit is another reason why some people opt for a short-term loan over a bank loan. With regular loans, the lender looks at your credit score. If you have a low score, you have a high chance of getting declined.
With alternative lending, since the loan typically gets paid back within the following year, the lenders will look at your credit history in a slightly different way.
Avoid Late Fees or NSF Charges
Late fees and NSF (non-sufficient funds) charges can come at you quite hard. They tend to be quite hefty if you miss a payment or your cheque bounces. If a cheque bounces, it could negatively affect your credit score.
Taking out a short-term loan allows you to make the payment before time runs out. That way, you can avoid the additional charges and ensure you have the money available next time.
For Emergency Repairs
Vehicles can break down at any given moment. When that happens, it’s quite frustrating. On the one hand, how do you get to where you need to go? On the other hand, how much will it cost you to repair your vehicle?
A short-term loan would be beneficial in this situation. You can access the money to get the repairs needed right away. It doesn’t have to be for a vehicle. Maybe a pipe burst in your bathroom, and you need to fix it right away. These loans work great for any emergency repair situations.
These are some good reasons as to why you would use a short-term loan. Avoid using them for situations like paying monthly bills, you maxed out your credit card, or you have a purchase that you could survive without.
Remember, a short-term loan is still a loan, which means you’ll need to pay it back. You don’t want to get caught falling behind in these payments because the interest fees tend to be quite expensive.