Short-term loans have gained popularity as a quick and convenient way for consumers to access the funding they need for countless purposes. This is particularly true for those individuals who have damaged credit, and who rely on short-term loans in place of conventional lending. We’ll look at the benefits and the drawbacks of a short-term loan so that you are well-equipped to make an informed decision about whether or not to take one out.
Pros of Short-Term Loans
1. Quick Access to Funds
One of the primary advantages of short-term loans is that they can be a source of quick funding. In many cases, funds can be received in less than 24 hours. This makes them perfect for emergencies.
2. Less Stringent Credit Requirements
Short-term loans generally won’t have the same rigid credit requirements compared to traditional loans, making their credit requirements much more relaxed. They’re ideal for individuals with damaged or less-than-perfect credit.
3. Flexible Terms
Another big benefit is that most short-term loans are highly flexible, allowing you to choose a repayment period that best suits your specific financial situation. Depending on your lender, you may have a repayment period of up to a year.
4. Less Cumulative Interest
Short-term loans are paid off in a much shorter period than conventional loans, meaning you’ll pay interest for a far shorter time. Less cumulative interest can make them a better choice in some situations.
Cons of Short-Term Loans
1. High-Interest Rates
While they are convenient, that convenience comes with the price of higher interest rates. The higher rates serve to offset the risks involved with lending to those with poor credit. Higher risk means higher rates.
2. Limited Borrowing Amounts
Another limitation of short-term loans is that they usually have far lower borrowing limits than conventional loans. This might be ok for an emergency scenario, but if you need a loan for a significant expense they may not be enough to cover the financial gap.
3. Risk of Debt Cycle
With short-term lending being so easy to obtain, it can be a too-tempting option for some borrowers. When borrowers begin to rely on a short-term loan for more of their expenses or to pay off a previous loan, it can lead to a vicious debt cycle. This cycle can be nearly impossible to escape without drastic financial action.
4. Impact on Credit Score
Although short-term loans can be easier to get, they can still have a significant effect on your credit score if not paid as agreed. Late payments as well as defaults will be reported to credit bureaus, and eventually sold to collection agencies or used to pursue legal action.
Let Cash Link USA Help You Make the Right Choice for Short-Term Loans
Now that you’ve seen the most significant advantages and disadvantages of a short-term loan, it’s important to consider your overall financial situation and goals before making a decision. Short-term loans can be a helpful solution for unexpected expenses, or sudden cash-flow shortfalls, but before you take one out it’s important to consider the potential downsides, like the interest rates and potential for debt-cycling.
If you think a short-term loan is right for your financial situation, don’t hesitate to leverage the most trusted name in online lending, Cash Link USA. The professionals at Cash Link will be able to help you find the ideal product for your needs, giving you a financial product customized to your unique situation. Reach out today for more information or to get started with an online application.