Short term money lenders provide short-term loans to borrowers who require money quickly. These can include cash advances, payday loans, title loans and pawn shop loans.
Though these loans can be beneficial in meeting immediate needs, they often come with high interest rates and fees. Furthermore, they have the potential to trap borrowers in debt cycles that are difficult to break free of.
Cash advance
If you need immediate cash, a cash advance might seem like the perfect solution. Unfortunately, it’s an expensive form of borrowing and should only be used as a last option.
Before taking out a cash advance, read the fine print carefully to comprehend all costs involved. Additionally, research other options that could save you on interest payments.
Credit cards can also be a viable alternative to borrowing from banks or online lenders. This type of lending tends to be less costly than cash advances and doesn’t affect your credit score as much.
Alternatively, you could ask friends and family for a loan. This is usually an affordable option; however, make sure that you can repay the money promptly.
Line of credit
If you need money quickly but cannot stomach a large lump sum, line of credit could be the perfect solution. These loans come in two varieties: secured and unsecured.
Secured lines of credit are secured by collateral such as your home or savings account, while unsecured credit is based on factors like your credit score, history and income.
People with good or excellent credit (at least 690 on the FICO scale) usually qualify for these loans at lower interest rates than those with poor credit.
Once approved for a line of credit, you can draw funds as needed and pay back what you borrow over time with interest. Depending on the lender, you may make regular minimum payments or interest-only payments.
Utilizing your line of credit wisely can help manage daily cash flow and cover unexpected expenses. It’s essential to remember, though, that having access to this kind of money requires discipline and you should create a repayment strategy accordingly.
Pawn shop
If you need money quickly but are ineligible for credit card or payday loan options, pawn shops could be an option. Here, you can take items with value into the shop and if you pay back the loan plus interest within a set period of time, they’ll return your items.
If not, they’ll sell it on to other customers for a small profit. But they lose money from the loan and interest costs incurred from holding onto it.
The primary function of a pawn shop is to provide you with fast cash. That’s why they often charge an interest rate of 10% per month or higher.
Pawn shops are regulated at the state level, though each has its own set of regulations. In some states, interest rates on loans may not exceed 4% per month; however, even then this still represents a staggeringly high rate of interest.
Personal loan
If you’re searching for a loan without the hassle of applying through traditional banks, personal loans might be your perfect solution. They can be used for debt consolidation, home improvements, vacations, large one-time expenses and more.
Finding a personal loan requires comparison between lenders online. Doing this will enable you to identify which loan option best meets your financial requirements and long-term objectives.
Personal loans typically feature fixed interest rates, so you know exactly what to expect throughout the duration of the loan. Furthermore, they often have lower APRs compared to credit cards which could save you money in the long run.
It’s essential that you make your payments on time and in full each month. Otherwise, your personal loan could go into collections or be charged off, which could negatively affect your credit score. So if this concern exists for you, think twice before taking out a personal loan.
