Short-term loans may seem like an attractive prospect if you have home repairs to make, a car to fix, or you want to book an excellent deal on a holiday but are a couple of weeks short of payday. However, is taking out a short-term loan always the best thing to do?
Short-term loans are often marketed as a way to receive a quick cash injection when you need it the most. There are considerations to make when deciding if this is the best financial decision for you, and luckily, you will not need to employ a financial advisor to decide if this is the best thing for you.
Short-term loan companies are transparent about what you are borrowing and how much it will cost. Below we have included some considerations and how to decide if the loan is right for you.
How Much Interest Will You Pay?
One of the first considerations you should make when choosing if a short-term loan is best for you is the amount of interest you will pay. Short-term loans frequently have a higher interest rate than a typical bank loan; however, they are easier to be approved for.
You should weigh up whether or not the additional interest is worth the approval of the loan you are interested in. If you know that you are due a large payment, such as a bonus at work or an inheritance, then a short-term loan, even with the higher interest rate, can be quickly repaid without incurring too much.
You should also ensure, if you are planning to repay your loan early, that there is no penalty for early repayment. Reading the terms and conditions of any financial arrangement is imperative before signing or receiving any money.
A short-term loan can be an effective way to obtain additional money on short notice, provided there is no penalty for early repayment, and the interest charge is not too high.
How Much Will the Repayments Be?
The second thing to consider is how much the regular repayments will be if you are not able to make an early, full repayment on the value of the loan. You can use the company website to see how much the loan repayments will be before taking out the agreement.
My Quick Loan offer online loans in the UK, and using a company like this will allow you to see what the repayments are before you receive the money. You can use a calculator on most websites to see how much the repayments will be depending on how long you take out the loan.
You should always ensure that the loan repayments are affordable before signing any agreements, as missed payments will adversely affect your credit score. If you can afford the repayments and cannot wait to save up for what you need, then a short-term loan can be the best way to proceed.
Other Options
There are, of course, numerous other options to make purchases or arrange repairs if you do not have the money to hand. However, there are very few safe ways to have the money to hand as quickly as a short-term loan.
Article and permission to publish here provided by Katie Barns. Originally written for Supply Chain Game Changer and published on April 2, 2024.
Cover photo by Towfiqu barbhuiya on Unsplash.