There are many times of loans and borrowing to choose from. With personal finance and business taking the money market by storm, it can get confusing as to where to start if you’re in need of a financial lift.
But thanks to the rise of short term lending, you don’t have to sign in for the next twenty years of your life anymore in order to pave the way to a brighter future. Everything from replacing a car to fixing the boiler can now be done on a shorter-term, with lower inconvenience to your wallet upfront.
What is a short term loan?
Known by a few different names, such as short term loans or payday loans, these smaller amounts borrowing services allow clients to take out just enough to cover their shortfall without having to spiral into debt. With payment terms spanning on average from one to twelve months, the clue is in the name – a short term loan.
These loans are useful in a pitch when you simply don’t have the money in the bank to cover an unexpected expense or if you are eager to make a purchase that you haven’t quite saved up for yet. Short term loans and bad credit can also go hand in hand as a solution to one another.
Due to their short term, these loans are often for smaller amounts, ranging from the high hundreds to the mid thousands, and carry high-interest charges past a certain period, so it’s important to pay them back on time.
Short term loans and bad credit
Bad credit can affect us all, especially when times get rough as we can no longer afford to pay for the luxuries we once catered to. Fall behind on payments, unexpected financial worries, and expenses, the loss of health or job can all lead to a plummeting credit score.
But how could a short term loan help with bad credit? It’s quite simple really. To improve your credit score, you must first be able to prove that you are financially liable and willing to pay off your debts, so in the base sense, creditors can trust you to do so with future loans. As short term or payday loans often come with a higher interest rate anyway, their lenders are more inclined to take risks in whom they lend money. Thus making it more likely that you will get approved in the first place.
This accomplished, you can then use your savvy and take out only a small affordable amount, paying it off before the due date, and in full. This will add credence to your credit score. Repeating the process in similar fashion infrequently will aid in rebuilding your bad credit to where you want it to be, meaning that larger and more profitable lenders will be willing once again to take you onto their books.
Good Credit Score Habits Moving Forward
Some of these tips might seem simple but trust us, these are some of the keys to good financial habits:
Pay your bills on time
Budget – you can’t spend what you don’t have or cannot afford
Only use your credit card if you can pay it off at the end of the month
Use the snowball method to pay off debt (clear your lowest debt first, then use the money you were paying towards that on the next biggest).
Avoid paying overdraft and banking fees
Spare cash – save it!