More of us are struggling to make ends meet which can be difficult to deal with, especially when you’re faced with an additional expense that your income won’t cover. This is where short-term loans bad credit can help. If you need extra income to help you pay for a broken boiler, or urgent car repair, taking out one of these loans could be an option for you. Read on as we weigh up the pros and the cons of a short-term loan.
What is a short-term loan?
Just like the name suggests, a short-term loan is a type of finance that allows you to borrow a small amount of cash and pay it back over a short amount of time. For this type of loan, that tends to be anywhere between a month to a year, but this can change depending on the loan and lender you choose. A popular type of short-term loan is payday loans. These loans are there to help you deal with an emergency expense that your income cannot stretch to cover, like a broken boiler or urgent car repair. These loans are offered by online lenders that provide an easy application process and aim to give you an approval decision sometimes in as little as 24 hours. This is why they’re useful if you need money for a time-sensitive issue. Some lenders base their decisions on affordability rather than credit score, so those that have struggled to manage their finances in the past can still benefit.
What are the benefits?
There’s a reason why short-term loans are so popular, and that’s because of the benefits they have to offer. Here are a few of the most notable:
- Fast approvals: This is why so many turn to a short-term loan when they’re faced with an emergency. Short-term loan lenders offer easy applications with fast approval rates, making them an option if you need access to cash quickly.
- Flexibility: There is a range of short-term loan lenders that can offer you a variety of terms and conditions to suit you, whether that’s how long you have to pay back the loan, or how much you’d like to borrow. Researching lenders means you can find the perfect loan to suit your needs.
- Build credit: If you know you have the funds to pay back your short-term loan, you can build your credit score to improve your finances and put you in a better position when it comes to taking out finance in the future. Of course, this could also work the opposite way, and if you don’t pay your loan back on time, your credit score could suffer.
What are the drawbacks?
Now we’ve looked at the benefits, it also helps to weigh these up with the drawbacks so you can decide whether short-term loans are the right option for you. Here are a few of the potential drawbacks you should be aware of:
- Interest rates: Make sure you’re aware of the interest rates that come with your loan. Typically, short-term loan lenders charge more as you have less time to repay, and they’re available to those with bad credit, which are risky borrowers in the eyes of lenders.
- Payment schedule: As we’ve mentioned above, short-term loans are paid over a shorter period and can therefore be challenging for some to manage. This can lead to difficulty in paying your bills if you’re already struggling.
- Limited funding: Short-term loans are meant to help you with emergencies that your income can’t cover, and because of their short-term, lenders only offer smaller amounts of money. These loans may not be right for you if you’re looking for a larger sum.
Are they right for you?
To find out whether a short-term loan is right for you, you need to first think about what you want to use it for. These loans are typically used to help you deal with an emergency, and because of their short-term, shouldn’t be used as a long-term solution to cash flow problems. If you are struggling to make ends meet and are faced with an expense you’re struggling to deal with on your own, a short-term loan could be an option, just make sure you can afford to make the short repayment schedule as necessary.