If you need cash, but do not qualify for a loan through a bank or other financial institution, short term loan companies are an excellent option. A short term loan, also referred to as a payday loan, is a loan that you take out and repay typically within a month or less. Short term loans have several benefits, such as no collateral is needed, you can apply online and you do not need to submit a credit report.Like any type of loan, borrowing from short term loan companies has its advantages and disadvantages. It is important to understand both, before you apply for the loan. The advantages, which often outweigh the disadvantages include:
- You can get the loan on the same day you fill out the loan application. In many situations, it may only take a couple of hours or less to be approved for the loan. If you apply in-person, it is typically quicker, however, online applications can be approved in about two hours.
- You do not need to have perfect credit to qualify for a short term loan. The short term loan company does not do a credit check on you, so a request will not show up in the credit report, which can reduce your credit score.
- For the majority of short term loans, you only need to show proof of identification, a checking account, proof of employment and verification of your address.
The primary disadvantage of a short term loan is the high interest rate. If you do not repay the loan on time, you will be charged additional fees, which may include late, renewal, delayed payment and or insufficient fund fees by your bank. A short term loan is ideal for those who are in an emergency situation, such as car troubles, medical emergency or facing the risk of utility disconnection. When you utilize the services of a short term loan company, it can save you the headaches of overdraft charges from writing checks for the emergency expenses and they allow you to take care of the emergency quickly. However, it is important that you understand the importance of repaying the loan on time and not abuse the service. In other words, continuing to borrow from a short term loan company will eventually make it difficult to get your finances in order and live on a scheduled budget.