Financial problems cannot always be anticipated, sometimes they can come about unexpectedly in the form of a medical bill or emergency vehicle repairs.
In the current economic climate, individuals are finding it increasingly difficult to save money.
This means, that when unforeseen expenses roll up on your doorstep, these individuals do not have the disposable income needed to respond.
Short-term loan benefits
Whether you find yourself in a financial pinch or in the midst of an emergency, there are fast ways to get your hands on some additional cash to ease the pressure. One of such ways is by obtaining a short-term loan. Short-term loans serve as a fast and easy means of getting smaller amounts of money to deal with an emergency or unexpected expense. This article will explain what short-term loans are and why they are a great alternative to long-term loans.
Short-term loans with long-term solutions
If you’re looking for a means to ease the financial pressure then a short-term loan is an excellent option to choose. Whether you need money for vehicle repairs, purchasing a new appliance or for a weekend away, a short-term loan will provide you with the finance that you need without creating long-term financial baggage.
The crux of short-term loans lies in its shorter lending periods generally ranging from six to eighteen months. Many borrowers do not want the responsibility of engaging in a long-term loan agreement. Long-term loans incur a lot more interest and become more costly over the entire loan period than short-term loans even though short-term loans have higher interest rates.
The reason for this is that the long-term loan is repaid over a longer period of time and, with each passing month; fees and charges need to be paid. Every payment also includes interest. Short-term loans can be paid off a lot faster which means fewer monthly charges and less time for interest to accumulated. The borrower can save even more money if they make additional payments or settle the loan early.
Short-term loans are a great way to rid you of small unforeseen financial pressures without having to worry about getting dragged into a long-term debt problem.
Why short-term loans are the best
Dynamite comes in small packages and this is the case with short-term loans. Short-term loans are not only nifty for an unforeseen situation but also a variety of other reasons, including:
- Improving credit score
- Lower interest repayable
- Fast approval
Improving your credit score
Individuals with a poor credit record are more likely to be granted access to short-term loans than long-term loans. This is because long-term loan commitments have a higher risk than short-term loans. However, a short-term loan can be repaid faster and can improve the individual’s credit score drastically within a very short period of time.
This means that the borrower will be able to access better loans in the future with higher borrowing amounts, lower rates and longer borrowing periods than before.
Lower interest repayable
Because short-term loans are payable over a shorter period of time, there is less time for interest to accumulate than with a long-term loan even though the interest rate on a short-term loan is higher. This is because interest is not given the extended period of time to compound on the total amount due.
Short-term loan flexibility
Short-term loans are also a lot more flexible than long-term loans. Borrowers are allowed to decide on the duration which best fits their financial situation and budget. Often short-term loans also allow for additional repayments to be made or early settlement. This means that the borrower can make higher monthly repayments or repay the loan early. This creates the opportunity for saving more money which can be put to better use.
Fast approval on short term loans
Since short-term loans allow for lower borrowing amounts and do not require collateral, the applications can be processed a lot faster than that of long-term loans. Applications can be completed online and approved within a few hours. In many cases, you can receive the much-needed funds within the same day.
Things to keep in mind about short term loans
Although short-term loans are excellent sources of finance for those rough financial spots there are a few factors that should be kept in mind when making use of them.
They are high-cost loans
Short-term loans do have a high-interest rate which means that the borrower will have to pay higher monthly repayments. When using a short-term loan the borrower needs to ensure that they can budget for the higher monthly repayments.
Negative credit score
If borrowers are unable to keep up with the higher repayments then it can harm their credit score possibly doing more harm than good. The convenience and flexibility offered by a short-term loan make them highly accessible and can result in seasonal borrowing which can become dangerous.
Short-term loans are one of the niftier loans available among financial products. They are available from most South African banks and small lenders making them highly accessible. If you need a small amount of cash in a hurry then a short-term loan is the answer that you have been searching for.