Short term loans can be an excellent tool if you're ever in a financial pinch. These loans are simple to acquire, generally having a short application process — and, of course, not taking that long to pay back. They can be quite useful for emergencies like car repairs if you don't have enough cash on hand.
However, they also come with some benefits that may not be apparent at first. Here are some unexpected ways short term loans can help you out.
1. Less Time in Debt
Short-term loans take much less time to pay off than their long-term counterparts for obvious reasons. This itself brings you a few benefits.
First of all, debt occupies a chunk of your income every month. The longer you're in debt, the more time said debt lays claim to part of your paycheck.
Additionally, having more debts is simply harder to manage. It adds more complexity to your finances. Once you pay off a debt, you don't have to keep track of as many cash flows. This results in a lower chance of incurring late fees or credit damage, and it gives you some peace of mind.
Debt is also mentally taxing for many people. It can be hard to enjoy spending money, even while following a sensible budget, when you know you have debt looming over you. Getting debt-free faster can be psychologically freeing.
2. Fast Application and Funding
Long-term loans often come in large sums. Thus, the lender has to spend plenty of time evaluating your application and, if approved, sending the money over.
On the other hand, short-term loans often cover smaller matters. Consequently, short-term lenders don't make their applications very long. You can usually get approved and funded in as little as the next day.
3. Easier Qualification Standards
As long-term loans typically involve more money, they also involve more risk for the lender. They might spend extensive time investigating the borrower's credit, income, employment status, current debts, and more to see if they qualify.
Sometimes, it may seem like long-term lenders are looking for a reason to disqualify you from borrowing instead of accepting your application.
Short-term loans don't have as stringent of requirements. Some may simply ask for your income and a bank statement or tax return to back it up. Other forms of short-term loans may want some collateral from you like the title to your car.
But no matter what, these types of loans don't generally have a long list of criteria to qualify, making it easier for people without a perfect financial history to access the money they need.
Notice: Information provided in this article is for informational purposes only. Consult your financial advisor about your financial circumstances.
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Original Source: Advance America: 3 Hidden Benefits of a Short-Term Loan
