You live a comfortable lifestyle and you’re not racking up debt. But, when your car broke down, you didn’t have the money to fix it! Don’t beat yourself up because about 54% of Americans live paycheck to paycheck.
When setbacks like this happen, it’s often frustrating and scary. Many people turn to loans to get them out of financial troubles. But, is that the best choice?
We put together a quick guide to explain all about quick short-term loans, so keep reading.
Short-Term Loan Options
There are 3 main types of short-term financing that you can take out. This is the difference between them.
Some banks allow you to pull out more money than you have in your account. But, this often incurs a large fee and/or interest.
Car Title Loan
For those who own the title of their car, you can take out a loan with that as collateral. Keep in mind that means your car is on the line if you can’t pay back the loan.
This type of loan is asking a company to give you an advance from your next paycheck. You can often take up to the full amount of your next check, but you’ll also need to pay the interest and fees associated with the loan.
Risks of Taking Quick Short-Term Loans
There are many disadvantages of short-term loans that could affect you in the future. These are the three most common risks of taking a short-term loan.
Lower Credit Score
Some loan companies run a hard credit check that lowers your credit score for a little while. Also, if you forget to pay or pay late, that hits your credit score.
Interest and Penalty Fees
Most short-term loan interest rates get pretty hefty and make it harder to pay back. If you don’t meet the terms of the loan, they slap you with large penalty fees too!
Vicious Loan Cycle
Many people fall into a cycle where they pay off one loan and then turn around and take another one out so they can get through the next month. This is a sure way to build up a mountain of debt! The good news is that you can get payday loan relief if you find yourself stuck in this cycle.
Don’t Let Yourself Get Deeper in Debt With a Loan
When life throws you for a loop and you need money fast, it causes a huge amount of stress. But, don’t let that stress make you do something you’ll regret further down the road!
Once you understand more about payday loans, they get less appealing. But, you can still use them on occasion as the last resort option.
We hope you learned everything you need to know about quick short-term loans. If you’re looking for more informative articles about money, lifestyles, and more, check out the rest of our blog today!