When you need money fast, a quick loan may seem like the solution to your problems.
Maybe you’ve lost your job, you’re facing a major car-repair bill or rent is due tomorrow. Whatever your urgent situation, a loan can put cash in your hands when you need it most.
Short-term personal loans help to alleviate immediate financial binds by providing quick cash to borrowers. The overarching reason to get a personal loan is to increase cash flow and financial flexibility. Short-term personal loans are not for all situations.
#1. Debt Consolidation
If you have a poor credit history and banks turn you down when you apply for long-term loans, consider short term personal loans as a means of debt consolidation. This allows you to not only pay off your debt but also to improve your credit status by showing that you can make payments on-time and in-full.
Debt consolidation will help you to:
- manage your debt and make life easier by consolidating bills into a single monthly payment
- reduce payments more than 50%
- pay off debt in much less time than if you don’t consolidate
- repair your damaged credit score.
#2. You won’t have to offer up collateral
Personal loans are unsecured, which means that unlike a mortgage or auto loan, you don’t have to offer up property or assets to qualify. If you default on a secured loan, like an auto loan, you risk losing whatever collateral you used to back the loan. That said, the cost of unsecured debt is generally higher because lenders have no fallback if you don’t pay.
#3. Good alternative to a payday loan
If you have low credit, you may have considered using a payday loan to cover a purchase. However, payday loans are problematic, even if they are an easy way to access cash between paychecks. They come with sky-high interest rates and fees. Borrowers can get sucked into a debt cycle with these loans, too.
#4. Making a large purchase
If you suddenly need to buy a new washer and dryer and don’t have the funds, a personal loan can be a great relief. A new computer, such as a gaming computer, can also end up costing more than what you have in your savings account.
Small personal loans let you purchase major household appliances and electronics immediately, rather than having to wait months to save up for them.
#5. Take a dream vacation
Your average vacation might not cost enough to necessitate taking out a personal loan, but what about a honeymoon or a luxury cruise? That’s where things can get pricey and a personal loan can help.
Just as personal loans can help pay for your wedding, they can also be used to help you see the world. Whether you’ve just graduated and want to go on a trip or you’re celebrating an anniversary, personal loans can help you fund your dream vacation.
Keep in mind
Personal loans are used for short term purposes and should not be used for long term financial resolutions. While there are plenty of good reasons to take out a personal loan, don’t forget that you will have to repay it. When you take out a personal loan to pay off credit cards or to throw the perfect wedding, you are borrowing money that will need to be repaid, with interest. Personal loans are a great way to consolidate debt and make major purchases but use them responsibly.