Your Complete Guide to Short-Term Personal Loans
Sometimes you manage your money well, other times you don’t. And in other instances, no matter how prepared you think you are, you just don’t have enough money on hand when it’s badly needed. Imagine you’ve got a bill due, but you don’t have the last couple hundred dollars you need to pay it, and a recent medical emergency set you back on funds. In scenarios such as this one, a short-term personal loan can be a viable option to consider.
As with any sort of decision involving money, it’s wise to do your research and consider your options.
What is a Short-Term Personal Loan?
A short-term personal loan—which is sometimes classified as a payday loan—is a type of unsecured loan given to anyone with a source of income.
Benefits of Short-Term Loans
Where other loans, such as personal loans, are designed to be paid back over a few years, a short-term personal loan is designed to be paid back within a year or even as little as a couple of weeks.
Short-term personal loans are beneficial in several ways including:
- Easy to acquire: Most other types of loans require much more than proof of a source of income before lenders will give you the money. Short-term personal loan lenders are primarily looking to see that you have a source of income with which to pay back the loan. Once that’s been verified, you’ll pretty much be good to go. Some lenders might want to bring on board a co-signer or make sure you have a decent credit score, but for the most part, short-term personal loans are available to most people.
- Less risky: Short-term personal loans are less risky because lenders know that the amount of time to pay this type of loan back is a lot shorter compared to most other loans.
- Potentially lower interest rates: Because short-term loans are, by definition, short in terms of loan length, the interest rates can be significantly lower than what you’d see on something like a personal loan. This all ultimately depends on the terms set by you and your lender. In some situations, this can mean that interest rates might be even higher than on other types of loans. The bottom line, do your research and see what your options are for short-term personal loans before you decide which lender to go with.
Do Short-Term Loans Hurt Credit?
Any loan will hurt your credit if you don’t pay it back on time. That being said, short-term loans are usually readily available to just about everyone—even if you have poor or bad credit to begin with.
Short-term loans can hurt credit, depending in part on the terms of your loan. Short-term loans have shorter payback periods than other types of loans, so in a situation where you’re tight on cash and can’t pay back the loan on its terms, then a short-term loan will hurt your credit score.
The reality is that all loans are going to affect your credit score. So, if you can stay on top of your payments and meet the terms set by your lender, your credit score won’t be negatively impacted if you take out a short-term personal loan. In fact, if you follow all the steps, your score could even improve.
How Can I Get a Small Loan Fast?
If you need to get a small loan quickly, you have several different places to look including online lenders, credit unions, or banks. Depending on how fast you need the money, an online lender is probably going to be your best bet. There are a lot of online lenders ready and willing to get you money when you say you need it.
The amount of money you want to get makes a difference as well; the smaller the amount you want to borrow, the more likely it is that you’ll get approved fast. Be thorough in your search. You don’t want to get slapped with additional fees and high-interest rates if you can avoid it.
The approval process will require you to provide certain things, like proof of income, a credit score, etc. You may also be asked to upload official documents as well. Each online lender will walk you through the steps of the approval process. Once you’ve been approved, you’ll receive the money.
Finding a Reliable Short-Term Loan
You can make sure the short-term personal loan you’re taking out is reliable by checking on the Better Business Bureau Database to see if the company is legitimate. And you should be aware of a few things as you consider getting a short-term personal loan, such as:
Can you repay the loan and meet its terms?
This will be important when determining if the loan you want to take out is reliable. Are its terms something you can meet reasonably? Are they asking too much of you?
What is your interest rate?
Compare lenders’ interest rates. Find one that is lower as it will be easier to repay. If the lenders are trying to charge you extreme levels of interest on a short-term personal loan, shop around a bit more. Don’t settle for too steep of an interest rate.
Will this help or hurt your credit score?
It’s always a good idea to build up good credit before taking out a loan. If that’s not possible and you need the loan right away, see if there’s any way your short-term personal loan will help you improve your credit score as you meet the payments and pay it off.
Best Short-Term Personal Loans
The best short-term personal loans are going to vary based on your unique needs. Maybe one lender will give you the amount of money you want at a higher interest rate, while another one won’t give you quite as much as you’d like but with lower interest.
What makes a short-term personal loan the best is what option works best for you. So do your homework, shop around, research your options, and make sure you have a plan in place for paying back the loan.