4 Things you need to know about short-term loans

1 in 7 don’t have any savings put away for a rainy day. The standard personal finance advice is to have an emergency fund set aside, but for those living week to week it’s not that easy. If you ever find yourself in a situation where you are considering a short-term loan, be sure to read these 4 things you need to know about short-term loans first

 

Brought to you by Nuffnang and Ferratum

 

In an ideal world no one would carry a debt, but the reality is life happens.  When something happens that you just don’t have the free cash for, the best thing you can do is be sure you understand exactly how loans work, and to make a plan to pay it back.

There are some things in life we just can’t predict.  Your car might need an urgent repair, which you need fixed so that you can drive to work.  Or you might have a dental emergency, and we all know how expensive that can be.  Not only do you need the money, but you need it now!  My usual advice is ensure you always have money set aside for these exact reasons, and in an ideal world everyone would have this emergency stash, but that’s not how  it always goes.  Everyday expenses add up, and on a low income that makes it very hard to save for a rainy day.

Short-term loans aren’t always seen in the best light, but they can sometimes be one of the only options.  The best gift you can give yourself before taking out a loan is the knowledge of how these loans work, and the costs involved.  You can then make an informed decision, and select the best lender and product for your needs.  The below tips include everything you need to know about the loans, and how to make a plan to pay them back.

 

Know the interest rate

 

Head to the website of a few lenders and find the page that outlines their interest rates, along with other fees and charges.  It’s a great idea to familiarise yourself with these charges so that you know exactly what your obligations will be.

A good lender will display a table on their website that outlines the total amount repayable for each loan size. 

 

Understand what happens if you miss repayments

 

If you think you might not be able to make a repayment, the first and most important thing you should do is get in touch with your lender and let them know what’s happening.  You might be able to organise a payment plan, or make another arrangement. 

If you do miss a repayment, you will likely be up for fees and charges, so it’s best to do everything in your power to avoid it.

 

Choose the right lender

 

There are so many short-term lenders out there, it can be hard to know who you can trust to be a legitimate lender.  Like anything in life, some lenders will be better than others.  Try a lender like Ferratum Loans, who are making an effort to actually help their customers reach their needs while at the same time improving the reputation of the industry.

 

Make a repayment plan

 

These loans will ensure you have the money you need quickly, but you then need to work out a plan to pay the money back.  Before you even apply for the loan, decide on the lowest loan term that you can reasonably make repayments on.  The shorter the loan term, the less you will pay in interest and other charges.

If you are struggling to fit the repayments into an already tight budget, consider other ways you could find the cash to make repayments.  You could have a clear out around the house, and sell anything you no longer need.  This is a great way to find money almost instantly, and you also get to declutter in the process.  Also consider if asking for extra shifts at work is an option, for finding a way to create a side income outside of work.  It’s easier than ever before to make extra money, with services like Airtasker, Air B&B and Uber.

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