Pros and Cons of Short Term Loans


Life today can be quite difficult, especially when you have to deal with unforeseen expenses such as medical bills when your paycheck is in a few weeks. This is where a short term loan turns out to be the go-to option for most people. Today, it is not a bad thing to take out short term loans as a payday loan to overcome the financial crisis. However, there are pros and cons to taking out a short term loan and you should consider them before applying.

Short term loans are one of the most popular forms of short term borrowing among people. These must be repaid within one month or on the next salary credit to the borrower’s account. Usually such a loan can range from a small amount up to 6 times the monthly salary of the borrower. That is why you must carefully analyze whether it is worth taking a payday loan or any other short-term loan.

Benefits of a short term loan

Short term loans are available without too many inconveniences. You can apply for a short term loan anytime and anywhere. Some registered lenders will process the loan application and after approval the loan amount is directly credited to the borrower’s bank account for use.

There is no need for elaborate paperwork and the long wait time that typical bank loans require. You get cash quickly to deal with unforeseen costs that you can’t cover with the cash on hand. You can repay the loan in the coming weeks, usually on the next payday.

One of the main advantages of a short term loan is that it can be used even by those who have a bad credit history or who have no collateral to offer. While banks may require it for personal loan etc., short term loan or payday loan does not require any credit check.

Disadvantages of a short term loan

While these loans are beneficial for people who are in urgent need of money to meet some big and unavoidable expense, it is not as if there is no inconvenience associated with them. For starters, the interest rates for short-term loans are always higher, which means that they are more expensive than other types of conventional loans. For example, a payday loan interest rate may be the same as the annual interest rates for an annual loan.

Also, short-term loans that need to be paid off the next payday would impact the next month’s finances while you apply for a payday loan. However, this problem can be solved if you choose the loan shark carefully. For example, some loan sharks allow borrowers to pay over several months, unlike those who require full repayment on the next salary credit.

That is why before you apply for a short term loan, you need to calculate and make sure that you have the capacity to repay the loan in full on the next payday credit. When you delay repayment, many lenders charge high late fees which can affect your payday loan interest rate, and there is no reason why you would want to burden yourself with additional costs. Therefore, you should carefully consider the need, try to have more time to pay the bill or the due date, consider borrowing from personal sources and only when nothing works, you should take out a short term loan.

By borrowing only for real needs, you don’t get into the habit of taking out a loan for lifestyle needs just because it’s readily available. Everyone likes to have more money on hand, but the higher interest rate on the loan makes you withdraw more money than you would usually pay.

Choose the right lender

When you apply for a payday loan or any other short-term loan, you should make sure that you only borrow from a genuine loan shark registered with the Department of Justice. You can go online and check the name of the lender on the department’s list. If not, you should avoid taking out a loan from such a creditor or you could have major problems later.

Once you know the lender is registered, you need to check things like loan interest rate and cost of penalties, other costs and repayment terms, etc. A good lender can charge you an interest rate as low as 2.27% per month and a repayment term of up to 12 months. They will not require any collateral and you can simply apply for a loan by filling out an online application form which takes no more than 5 minutes of your time. Loan officers usually call back within one day and after approval, the amount is credited to your bank account.

So as long as you have a real need and have a repayment plan / capacity, go ahead and live worry-free by taking out a short term loan to handle your emergency cash needs.


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