Why People Use Short Term Loan As Their Last Resort?

Short term loans are pretty much all over the place. When you are living paycheck to paycheck, it becomes hard to save enough for emergency expenses. Unexpected arrival of emergency can send you in a state of shock and stress. It feels embarrassing to ask for financial help from friends and family. Also, with short term loan it has become easy and fast to get the required cash to fix mid-month cash crisis as early as possible. Such factors impels you rely on a short term loan and considering it as their last resort to get over with temporary financial crunch.

What is a short term loan?

It is a common loan that offers immediate financial help until you get next paid. Such kind of loan may come in hands and seems to be a perfect solution to get approved in least possible time with cash transferred to your bank account in just few business days. The most important factor that you should know about this loan is that it is quite expensive. Due to being offered for such a short time, lenders will be charging the loan with a higher rate of interest.

Is it really a last resort?

The answer to this could be it depends on person to person and situation to situation. One should consider applying for a short term loan as a last resort only when if they out of options. Other helpful borrowing options that you can consider includes using credit cards, taking advance from an employer, asking for financial help from loves ones, using pre-planned savings for unexpected expenses. If all these sources fail to help you generate much needed funds, then only you should think about applying for a short term loan. Whatever the reason may be, whenever you desperately in need of cash, the stress and tension takes you over completely and you end up making impulse decision which you may later regret. Therefore, it is necessary to calm down first and then look for several other helpful options available.

Pros of short-term loans

  • Quick financial flexibility
  • Best option available for people who live paycheck-to-paycheck
  • Funds deposited directly into your bank account
  • Easy access to funds
  • Fast loan approval
  • Easy qualifications
  • No restriction on the usage of borrowed funds
  • Online applying is feasible to get the loan with better rates and terms

Cons of short-term loans

  • Expensive type of debt
  • Higher interest rates, high APR
  • Not affordable by everyone
  • Hit with hefty charges, penalties and enhanced interest rates if not repaid on time

Bottom line

Short term loans are considered to be easy to apply and fast approval loans. But coming with such higher interest charges, it becomes an expensive financial option. To meet end needs with ease, more people are applying for such loans, but with increasing number of non-repayment of the loan more and more people are ending with huge debts. By seeing high default rates of the applicants, many states have decided to ban such loans.

Should you really take out a short-term loan?

Well, if are good with managing timely repayment then these loans can be a right option for you. However, it is advisable to go for them only under extreme emergencies. If you think your emergency needs are completely unavoidable and cannot be delayed, then you can choose to apply for loans to get timely cash support to fix your temporary financial problems on time. Qualifying for these loans is quite easy, which possibly one of the main reasons for their popularity. You just need to be over eighteen years old with having regular source of income and holding a valid healthy bank account for electronic supply of funds.

Some needs are hard to ignore. These can be your child's education fees, some unplanned medical aid, small home or car repair charges, utilities payment and small other unplanned expenses. All these uninvited expenses demands quick fix. In such an expensive world of today, it is really hard to live paycheck-to-paycheck. The prices of almost everything are getting higher and higher with each passing day. Short term loan works as a quick resort to fix the problem but it is surely not an ultimate solution to end the problem completely. The real problem starts when you could not able to pay back the loan on time.

Conclusion

Short term loan can be nerve-racking. Higher interest rate and fees makes a financial emergency into a big debt problem if not handled carefully. Try hard to avoid them at all cost and educate yourself about the alternatives of short term loans.