Short term loans are quick and convenient loan options during financial emergencies. Its quick approval feature makes it the ‘to-go ‘option not only for people with bad credit score but even those with excellent credit as well.
Here are the practical benefits of short term loans that many borrowers don’t know about:
Improves your credit score
Your credit report shows all your credit transactions, including your short term small loan applications. So, if you applied for these loans a few months back; but, you were rejected– then your credit score will reflect this event. But, when you get approved for a short-term loan and you have made timely repayments towards the loan it will improve your credit profile. While you may not have a huge improvement in your score—potential lenders will look at your application in a positive light because of your good repayment habits.
If your credit score suffered from wrong financial decisions in the past, you may want to get a short term loan to build a solid credit history. Even those who have no credit history can use this loan to increase their credibility, just be sure to limit your expenses, so you can pay your loans on time and avoid arrears.
When you consumed more than 30% of your credit limit and you have large credit card balances, your credit score may go down. The same thing happens when you send too many loan enquiries. If you get approved for a short term loan and you sue it to pay your outstanding debts, it could raise your score by a notch.
You can save interests and fees on high interest loans
Let’s say you have five credit cards with $2000 balance at 25% ($500 a year). If you take out a short-term loan with 15 % APR, you can save $200 in the process. It helps you avoid paying late payment fees as well. By getting a short term loan to pay your other existing consumer debts, you actually save more money and enjoy the convenience of paying only one debt.
As previously mentioned, a short term loan is advisable for those with several consumer debts especially if you’re missing payments on them. Carrying large balance on credit cards, and paying only the minimum could double up your loan and potentially drag you in debt years after.
Inject capital into your business
If you are running a small business, you can turn to short term loans to cover not only your basic expenses but to cover operational costs.
It is your lifeline in times of financial doldrums because of its quick approval feature. With an accessible credit available, you can make sound decisions on negotiating better deals with your suppliers, procuring raw materials, clearing dues and expanding your business. There is no need to worry about being thrown out of your business space because you can quickly access this loan to pay for your monthly rents. Those with plenty of collectables can access this loan to ensure consistent cash flow. There is no need for you to wait up to 90 days to convert the inventory into cash. You can access the short term loan now, and you can just pay it back later when your clients have fully paid the receivables in full. This way, your business will go on as usual, and you can fill in the gap in your income. It ensures that you would not lack raw materials or supplies needed to run your business smoothly on a day to day basis.
Short term loans with a twist
If you have built equity in your home, you can apply for second mortgage to get a higher amount of loan. It has lower interest rates compared to credit cards and traditional personal loans. You can use it to consolidate your loans, including your current mortgage. By rolling your credit card debts, line of credit, personal loans and mortgages into one—you can enjoy the convenience of making only one payment each month.
The proceeds of your home equity loan can replace your income and help you transition smoothly, especially during retirement. You can also use the money to finance both your short-term and long-term financial goals. It also has quick processing feature, similar to a short-term loan. The huge difference is that traditional short-term loans have high interests and fees while home equity loan costs less because it is a secured loan. By consolidating your debts, your credit score may increase overtime and you can save more money in the process.
Traditional personal loans do not come cheap. They usually charge high interests over a short period of time, especially if it is unsecured. If you have bad credit score, or negative credit history, do not expect for a minimum interest rate. Your bets option is to look for a specialised lender like Bad Credit Loans that offers short term loans and home equity loans at an affordable rate. You can negotiate for minimum repayment each month and a lower overall short term loans cost.