A short-term loan can be used to sort out different types of financial emergencies. At the same time, it’s quite important to make sure you are taking the right loan that matches your financial situation. By design, these loans are meant to give you the necessary short-term support as you put your finances in order.
Before you make a borrowing decision, it’s important that you have some insight on how to safely navigate the lending process. Here, you will learn some tips to help you deal with short-term loans.
Use short-term borrowing only when you have to
Getting a short-term personal loan has become extremely easy and convenient. This is because most online lenders don’t have a complicated application process and they can also offer you the funds without the need for collateral.
Nevertheless, borrowing a short-term loan should come as a last resort. Basically, short-term personal loans tend to be more expensive than long-term credit. As such, you should settle for a short-term loan when you are sure that it will help you avoid more expensive options like credit card debts.
Since these loans have strict repayment terms, you can easily damage your credit scores if you are not in apposition to pay as agreed. Every time you borrow these credit loans, it’s important that you do your best to repay on time.
Always read the loan agreement
The fact that people seek short-term loans when they are faced with an emergency can make you overlook some important details. Despite your presumed sense of urgency, you must always read and understand the details of the agreement.
Generally, this is the best way you will know what you are signing up for. While some lenders may use enticing phrases in their outreach and advertising campaigns, the truth can only be uncovered by studying the fine print.
In this document, you will find the fees and penalties associated with the loan. Since different lenders have different terms, it is always prudent to confirm whether you will be charged anything that you don’t agree with. If you find that you don’t understand something, it’s best to ask your prospective creditor to expound on the matter.
Avoid multiple applications
Before you borrow, look at several offers and settle on the one that best suits your needs. This works better as opposed to submitting multiple applications with the hope that at least one attempt will be successful.
Always remember that some lenders rely on a hard credit check during the loan approval process. As such, multiple inquiries can harm your credit scores and this isn’t something you want to happen to you. At the same time, lenders can be skeptical when they realize you are submitting lots of applications.
Always check your credit scores to make sure they are correct
When borrowing, your credit scores are very important. This is a critical factor that determines the amount you will be allowed to borrow. Most importantly, lenders rely on the scores to decide the interest rate as well as the repayment period. To illustrate, someone with stellar credit scores can qualify for a loan with 8% interests while low credit scores will attract an interest rate of almost 20% for the same loan amount.
Therefore, you must always make sure the credit report is accurate at all times. If you realize that there are some mistakes in the report, make a point of contacting the creditor in question as well as the credit bureaus. At times, some creditors may tend to report missed payments without reporting all the other timely payments. When dealing with a lender, make sure they report all the transactions.
Avoid rollovers at all costs
When you are certain that you will soon have some money, a short-term loan can help you address temporal financial difficulties. These loans come with the option of extensions or rollovers. However, this is an expensive move that can lead you into cyclic debt.
At first, it seems like a good idea considering that you will only be paying the fees for the first principal. But after some time, you realize the potential danger of these options when you are slapped with hefty fees and high interest rates.
Some people also tend to take a loan from another lender in a bid to service a loan that is almost due. As a rule of thumb, you shouldn’t borrow another short-term loan to repay an existing payday loan.
Your security is important
Today, there are tons of online lenders seeking to offer quick loans. While most of these service providers are here to help their clients, there are still those that are not genuine in their operations.
With the rising cases of identity theft and other forms of cyber-crime, it’s your responsibility to make sure you are safe. Therefore, you should do your best to ensure that you are dealing with a responsible lender who wants the best for their clients.
Before you submit any details, always run a background check to make sure the lender is genuine. If you deal with a fraudster, it’s highly likely that your personal details will be sold off to third parties or even used to commit other crimes. Therefore, make a point of reading a few reviews from previous clients as well as checking with the Business Bureau.
When used diligently, a short-term loan can be a great tool. Nevertheless, people who don’t embrace responsible borrowing practices are likely to encounter problems with personal loans. Therefore it’s important that you follow the tips shared here to make sure your borrowing experience is nothing short of great.