We need money for everything – money pays for our bills, the food we eat, and the house we live in. Without it, we cannot get the necessities of basic life.
Many of us face financial struggles, for diverse reasons, and although stretching paychecks until the end of the month usually works, this is not always possible if we face unplanned financial emergencies that put a serious strain on our financial ability to cope with everything. In cases like this, your only alternative may be to get a loan. In this article, we will discuss the basic things you should know about short-term loans.
Types of Short-Term Loans
- Credit Cards – A credit card essentially enables you to make payments and pay it back later, with interest. With this option, you must look into interest rates so you know how much you will be charged later.
- Payday Loans – This option is easily accessible. It is an option available in most high streets and money shops. You can also get instant payday loans online, which makes the process of obtaining a short-term loan even simpler, without having to leave your home. As the name suggests, you just need to pay this on the next payday salary.
- Interest-Free Overdraft– Overdrafts are usually offered by most banks and building societies, similar to the option above, it can be a quick way to ensure you can cover any payments, however, if there is any interest added to this, it can put you in more debt.
How Does It Work?
Getting a short-term loan is fairly simple. You can do this by visiting your bank, a money shop, or you can simply do it online. The whole process is also simple, as you are only required to complete a short application with your personal details.
Once you apply for it, the money is paid straight into your bank account, and once you get paid from your job, at the end of the month, you repay the amount you borrowed, plus any additional fees. Depending on the amount you borrow, you may be able to repay in installments, although this is not always an available option.
As mentioned earlier, you will usually be charged additional fees and interest on top of the amount you have borrowed. If you do not make the payments on time, these charges will increase. A short-term loan can be expensive and worsen your financial situation if you are not careful and ensure payments are made when due. Therefore, you should consider carefully before making this commitment.
Before you apply for a short-term loan, many lenders will give you the option to set up a recurring payment plan. This allows lenders to take money straight from your bank account so that you meet the installments you have agreed.
Although this can be useful, so that you do not forget to make payments, incurring unnecessary interest fees, it can also be risky. This option makes this payment a priority, potentially leaving you with not much money to pay other essential bills, such as rent, heating, or food. If you have an overdraft limit in your bank account, this inability to meet payment may incur additional charges and you may increase your debt.
Seek Expert Financial Advice
As mentioned above, getting a short-term loan can be very useful and the only alternative if you are struggling financially. However, you must consider a few things before you get a short-term loan, to avoid serious issues such as long-term debt. For this reason, you should seek financial advice from an expert to explore whether this is the best option for yourself so that you can make the final decision.
There are many places you can go to obtain free financial advice on how to budget and manage your own money as well as how to best get out of debt. This may reduce the number of times you need to resort to applying for loans. Being financially literate is the key to managing money, and there are many financial courses available that you can take to increase your financial awareness and budgeting skills.
Before Aware of Scams
The demand for short-term loans has increased the number of more scams associated with these loans, where lenders use hidden terms and conditions to charge borrowers severe fees and interest, and in some cases even attempt to steal the identity of their customers. For this reason, you must ensure you borrow money from a renowned broker and carefully review this, particularly if you are using this service online.
There are potential risks with getting short-term loans if you are dealing with a bad lender. However, if you select a good lender, you avoid most of the dangers associated with this process. Moreover, ensure you read the terms and conditions thoroughly before agreeing to these.
Short-term payday loans are a great way to enable you to cope financially if you encounter difficulties and you need quick and easy support. There are also a few disadvantages and things to look out for. Ensure you conduct your research and that you are financially prepared to repay the loan, to avoid debt.