When You Should Consider Getting a Short-term Loan

By Angela Monroe - March 26, 2020

Short-term loans can be really useful for people in specific situations. If you’re keen to find out about the best time to use short term loans, you may want to read through some of the options below to find out if they match up with how your finances are currently looking.

There are pros and cons to short term loans so it’s important to do your research and find the right lender for you. If you have bad credit, you’ll want to find a trusted lender who can work with you to help find the best options for your individual situation.

Getting money quickly

Often the best time to use short-term loans is when you need money quickly. There could be lots of reasons for this including:

  • Essential home maintenance
  • Urgent medical expenses
  • Unexpected car repairs
  • Deposit for a rental
  • Making payment for a wedding or holiday

With other types of loans, you could face a fairly lengthy process to get your loan approved with lenders often requiring lots of detailed information and documentation. Short-term loans are often much quicker to get approved, meaning that you can often have the funds that you need within just a few days.

Easy application

You don’t have a lot of time, and you need a loan that’s easy to access with a simple, fast application process. This could be the best time to use short-term loans. More and more online loan companies are offering online application for short-term loans.

This means that you can apply for your loan from the comfort of your own home, at any time of day or night. You don’t need to get to the bank or wait in a line or on hold over the phone.

Flexible payment plans

Long-term loans such as mortgages or car loans can often have fixed loan terms and set amounts that you are able to borrow.

One of the best times to use short-term loans is when you need something specifically tailored to your needs. With many short-term loans, you can customise your payment plan to suit you such as:

  • Short-term loans don’t come with a fixed sum of money, so you can only borrow the money that you need.
  • Decide how soon you want to pay the money back. If you think it’s financially feasible for you to pay the amount borrowed back in full within 3 months, go for this option. If you think you’ll need slightly longer, try opting for 5-6 months.

Keep on top of things

Short-term loans mean that you can keep on top of things and try to avoid getting into unnecessary debt. If you have bad credit, you’ll want to make sure that you always stay on top of your short-term loan – making all the required payments in full on the dates required.

It’s easier to stay on top of short-term loans as the loan term is shorter and you’re only borrowing the money for a short amount of time. It should be your top priority to get it paid back as soon as you have the funds available. If you do this, you could actually help your credit rating by showing evidence of responsible borrowing to future lenders.

Things to look out for with a short-term loan

Once you’ve decided the best time to use a short-term loan you’ll want to start learning everything you can about the different types of short-term loans on offer. Although they can provide quick and easy to access funds which you may urgently need, there are some key points you need to be aware of with short-term loans to help you use them efficiently.

  • Look for the lowest interest rate possible. It’s very likely that your short-term loan will come with a higher interest rate than other types of loan, but double-check that you’re not being taken advantage of. Compare it with other short-term loans on offer.
  • Always look at the total cost of each short-term loan. Remember that you will need to pay back the full loan amount with interest added on top. You should also double-check whether there are any fees and charges that you need to be aware of. Take some time to budget and check that you can make the repayments required on your short-term loan.
  • Budget carefully. You need to sit down and be honest with yourself about your current budget and how much you can spend on a short-term loan. Figure out how long you think it would take you to pay back the full amount, without putting yourself under huge financial strain. Many people get tempted to take a short-term loan as it’s quick and easy – but they find themselves having financial problems further down the line when they can’t pay it back on time and are faced with penalty charges and damage to their credit rating.
  • If you have bad credit, you’ll find it helpful to work with a specialised lender who is experienced in helping people with bad credit to find the right short-term loan for them. This will help to ensure you don’t get applications rejected and that you find a loan that works for your specific credit situation.

Is a short-term loan right for you?

The best time to use short-term loans is going to be dependent on a variety of factors, the most important of which is your current personal and financial situation.

Take the time to assess this properly, being honest with yourself and your lender about how much you have coming into your bank account each month and what you can realistically afford to borrow and payback within the short-term loan term you are keen to agree to.

If you’re unsure about how to properly weigh up the pros and cons of short-term loans in relation to your finances, don’t be afraid to ask for expert help. If you have bad credit, speak specifically to lenders experienced in helping people with bad credit to ensure you get tailored help direct to you.

Angela Monroe
Angela Monroe is the Community Manager at The Positive Group, specialising in giving people the information that they need when they need it, and putting you on the path to a fair financial future. She has 8 years of experience in helping Australians find the right finance solutions, and regularly contributes articles to empower Australians with the knowledge they need to become financially healthy.

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