Obtaining a loan is all at once a blessing and a curse. You have the windfall to pay off your debts in (hopefully) one fell swoop, and maybe have enough over to treat yourself. But having a loan comes with its pitfalls. There are long term loans, but the focus is on the short-term loan here. What are the advantages and disadvantages of a loan that you can have for a short period?
They Are Incredibly Convenient
If you are looking to pay off some bills or credit cards as soon as possible and you’re just not handy with your cash at the time, getting a short term loan is great for those circumstances. It is a method that businesses use on occasion too.
The Credit History Repercussions Are Minimal
When it comes to borrowing money from any institution, having your credit score checked is a painful part of the process. If you are not good with your money, it reflects on your credit score, and so loans can be much harder to acquire. Luckily, with borrowing short term, there are much fewer requirements for borrowing. This is because the loan is on a short term basis.
The Flexibility Is Great
When it comes to having any loan, it is a money shaped cloud hanging over your head. A lot of people try to get rid of the loan as soon as they can. A short term loan is perfect for this reason, especially when there is flexibility in setting the period for paying back the money. When it comes to looking at companies to borrow from, do your research and find what is right for you.
With shorter loan periods, the lender will ask for a higher rate of interest in comparison to other long-term loans. In these cases, the interest you end up paying is a lot less compared to what you would have paid in case you had to pay back the money you borrowed over a longer period.
It Is An Easy Habit To Fall Into
Getting a short term loan is very convenient. The habit of getting a short term loan each time to bail you out is almost too easy to get into. Short term loans are incredibly convenient. But people often end up spending more money than they can afford, which can turn into a self-perpetuating problem. You may get another loan to pay off a loan etc. Sometimes better financial planning can improve your money situation over a convenient cash flow situation.
Is The Overdraft A Better Option?
Only you can answer this question. Sometimes getting an extension on your bank overdraft can be a healthier approach. But with this comes with the bank’s own particular charging criteria. So weigh up your options, and you will be able to see which is the better option for you. But, that is the long and short of a short term loan.