The Loan Ranger: Short-Term Loans And Their Pros And Cons

We have all come into financial hardship at some point in our lives, and it is, of course, incredibly stressful. Looking for the financial solution to your problems can come in many forms. A short-term loan is one method, and it can either be a blessing in disguise, or a blatantly obvious curse. There are pros and cons to having this type of loan, but what are they?

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If you need to pay off smaller funds, such as credit cards (not when you’re buying a new house) as soon as you can but your pay was a little low this month, a short-term loan is very good. In fact, businesses use them on occasion when they need to pay suppliers.

There Is Minimal Effect On Your Credit History

When you borrow money from any financial institution, from an online supplier like LendingTree to your smalltown bank, your credit score can be the barrier to you obtaining a loan or walking away with your hands in empty pockets. If you have a bad credit history, it will be reflected in your credit score, making loans very difficult to obtain. Borrowing on a short-term basis, there are less requirements, and so your credit score wouldn’t be as negatively impacted than on a longer term.

They Are Flexible

With loans in the short-term, you can set the repayment time to be as flexible as your bank balance allows. As borrowing money can be a stressful period of time for you, it can feel like it is a weight hanging around your neck. This is why a short-term loan is perfect for this kind of scenario. You can only repay a certain amount per month? Set the amount of time to reflect this.


The Interest Rates Are Different

In obtaining a short-term loan, the lender will offer a much higher rate of interest over a loan that is a much longer term. While it may sound like a lot more money to pay back, depending on the amount of time you will pay it back over, it will be a lot less than your standard long-term loans.

It Is Quite An Easy Habit To Fall Into

And this can be a bit of a trap. Getting a short-term loan is very convenient to bail you out. But if you then get into the habit of getting another loan to pay off your previous loan, you will end up in a trap. Instead of being a frivolous spender, you may need to get into the habit of financial planning to set up your spending habits. There may be things that you can cut back on, or reduce, like a phone bill, to set you up for better financial habits.

Look For The More Sensible Option

For example, is an overdraft a better choice for you? Getting an extension on your funds via your overdraft may be better for you and your credit score, but it depends on your own bank’s overdraft terms or criteria.


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