When are Short-Term Loans Beneficial?

Short-term loans, often referred to as payday loans, can be beneficial to your financial circumstance. Yes, they typically charge fairly high fees and they usually require a quick repayment; however, they may also provide a solution for a pressing financial issue that must be dealt with now, and not two weeks when their paycheck arrives.

There are, in fact, times when a payday loan may make sense. For many consumers, short-term loans have provided them with quick cash during an emergency situation or when their cash flow falls short before their next paycheck.

Although payday lenders have been criticized by the lending industry for charging hefty fees, it is important to understand that other types of short-term loans can also prove to be expensive. If you are aware of all the fees associated with payday loans, and you use them only in an emergency situation, then you can proceed in a responsible manner.

The following list details circumstances in which short-term loans, such as payday loans, are beneficial:

•           You have poor credit and are unable to secure a credit card or personal loan. Many consumers use their credit cards to bridge them financially until the next paycheck. However, for many consumers with poor or no credit, their options may be limited when seeking short-term cash solutions. Most payday lenders will lend money to consumers with poor credit (with the exception of those individuals who are in bankruptcy).  For most lenders, however, you must be at least 18, you must have a source of income and you must have an active bank account.

•           You are in an emergency situation and you don’t have the time to secure a personal loan. For many consumers, payday loans are used because of their convenience.  Most payday lenders are able to provide consumers with cash within 24 hours, which therefore makes the process of paying debt an easier one. For example, if your car requires expensive repairs, and you must have your car to travel back and forth between your job, you may need the services of a payday lender so that you can obtain quick cash and get your car back in a reasonable amount of time.

•           You are in danger of overdrawing your account and bouncing a handful of checks. The overdraft fees charged by many banks are enough to make any consumer gasp in disbelief. Although the fees associated with payday loans can be costly, dealing with multiple overdraft bank fees (which can often be as high as $25 to $40 each) can be much more expensive. If you need quick cash to avoid a banking account meltdown, then a payday loan may be right for you.

•           You are in danger of having your utilities turned off, being evicted, or having your car repossessed. Payday loans can often come in handy when you are in a particularly precarious position. For many, being able to obtain a short-term loan to pay their gas bill is extremely important, for example, especially if they run the risk of having it shut off during the winter.

Most of us, at one time or another, have found ourselves in a financial pinch. It is, therefore, important to explore all of your options and determine which source of short-term cash is right for you.

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