The Benefits and Drawbacks of Short Term Personal Loans

Many people have utilized short term personal loans for a variety of different reasons. Short term personal loans are a way to get the money that you need, on a short term basis. This type of loan has a few worthwhile benefits. However, there are also some drawbacks associated with it as well. 

Benefits

  • Quick money- The biggest benefit of a short term personal loan is that it gives you access to the money that you need quickly. If you are in an emergency situation, you need money quickly without a lengthy loan approval process. Short term personal loans can provide the money that you need within a much shorter time span than other types of loans.
  • No collateral- Many short term personal loans can be granted without having to tie up any of your property as collateral. When you have to use something as collateral, it puts that particular item at risk if you were to default on the loan. With a short term personal loan, you can get the money you need without risking any of your things.
  • Questionable credit approvals- Many short term personal loan lenders do not put a heavy emphasis on your credit history. As long as you have a steady income and do not have any other outstanding loans, many of them will give you the loan. This allows many people that would not be able to qualify for other loans, the ability to get money when they need it.
  • No long term commitment- One problem with larger loans is that you have to commit to something for a long period of time. Loans that last for many years can be an intimidating prospect to worry about. With this type of loan, you can focus on the immediate future only.
  • Flexibility- With many short term loans, you can find some very flexible terms to work with. For example, you may be able to just make interest payments each month and then pay off the balance of the loan at a later date. This can allow you to find a loan that fits with your current situation.

Drawbacks

  • High interest- The biggest drawback to using a short term personal loan is that the interest rate is going to be higher than long term loans. In some cases, the rates can be quite a bit higher than you are used to. This adds to the total amount of the loan and it can make your payments higher.
  • Add to the problem- Many times, people take out short term personal loans because they are short on cash. They can not afford all of the bills that they have and as a result, they need to borrow some money. While this will get them by in the short term, many times they will not have any more money later when the loan is due. This can just compound the problem and get them deeper in debt. 
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