The Main Disadvantages of Short Term Loans  

disadvantages of short term loans


Short term loans, as far as you’re concerned, are harmless. What can go wrong if you borrow a relatively small sum of money with a short term? Well, a bunch of things, actually. While it is true that short term loans are a lot less dangerous than those with long term, they are not completely devoid of risks. Therefore, before you go to the bank and ask for one, you better become acquainted with the disadvantages it will come with.

This way, you will spare yourself of some unpleasant consequences. There are 3 main pitfalls when it comes to short term loans and we will tackle them all shortly. The Downsides of Short Term Loans are:


They have higher costs:

At first, it might not look like the loan you’re trying to get is that expensive. However, multiple fees can be applied to it, boosting the overall price in the end. Suppose you got a $100 loan with a 10% fee. That’s $10 that will go out of your pocket. But now, if you paid that same fee every 2 weeks for an entire year, the price would go beyond 200%. As you can see, it’s not that feasible as you might have thought it was. It’s important to choose a lender that does not bombard you with other additional fees.

And of course, the sooner you pay the loan, the lower the total payment will be. At least try to repay it within the timeframe. Interest fees won’t have enough time to increase, so you’ll be a lot safer.


You might end up borrowing all over again:

Once more, short term loans are pretty inoffensive tools, even though somewhat more expensive, in some cases, than their long term kindred. The biggest issue with them is the fact that, before you know it, you’ll borrow all over again. If you lacked funding this month, you’ll probably lack it next month, too. What will you do then? Ask for another short term loan. Eventually, you’ll end up in a vicious borrowing cycle.

Consequently, your debt will continue to soar to unimaginable heights and you might have some really severe issues in repaying it all, especially when you’ve taken multiple loans from multiple lenders. It’s very important you don’t spiral out of control. First of all, the fact that you needed a loan in the first place is conversant of the fact that you’ve got some issues with the way you manage your money. Assess where the problem is and don’t start borrowing money on a regular basis. Small sums, when piled up, can give birth to some outstanding debt.



Most of the time, short term loans are secured, believe it or not. Usually, you borrow money against one of your accounts or your account, if you have only one. As a consequence, a lender is free to bounce your deposit if you fail to pay the loan on time. The collateral depends on how much money you borrow. If the sum is pretty large and the term is longer than it would normally be, the collateral will have to be larger. In some cases, it will be your car.

Now, if you fail to repay the loan, the lender has the right to repossess your car and do whatever he wants to do with it in order to get his money back. We are 100% sure this is not something you would ever want to take for granted. Short term loans are fantastic and all that, but they cease to be so appealing when they can have incredible consequences on your well-being. If possible, try to aim for an unsecured loan. Due to the fact that the sum of a short term loan is not that high, it doesn’t make that much sense to secure it on anything. If the sum were extremely large, then yes, a collateral would have been preferable.

This way, however, you shouldn’t secure the loan on anything, because you have plenty of time until the next payday to come up with the money to repay it.


Concluding Remarks

Short term loans are extremely helpful in a wide variety of cases, as people are given quick funding for financial emergencies. With all these, they have a set of downsides that everybody needs to be familiar with. If you’re not that keen on a short term loan, you should learn about the other alternatives you have. Whether you are looking for a short term or other methods of funding, contact Bad Credit Loans today and discuss your options.