Are Short-Term Loans Worth The Interest Risk?

Saturday, April 12, 2014, 1:00 AM | Leave Comment

If you’ve found yourself in a place where you need money quickly and you’re considering a short-term loan, you’re not alone. Many people are faced with job loss, emergency expenses such as medical bills, and other situations that put them in a financial crunch.

While short-term loans can seem like a very attractive option, some people wonder if it’s worth the large interest rate that comes with them.

Below are five situations in which a short-term loan is worth the interest risk.

  • You Could Lose Your Home or Car

    If you don’t have a place to live or a way to get to a new job, your children’s school, or other places you need to be, nothing else matters. Keeping a roof over your head and ensuring reliable transportation are essential, so if you need some extra cash to cover these essentials, it’s certainly worth the higher interest rate to do so.

  • You Can’t Put Food on the Table

    Again, this is a situation that is fairly dire, and if you can pay back the loan per the agreement terms, you should certainly risk the interest rate and take the loan. Any time you find yourself unable to cover absolute necessities, the high interest rate that tends to accompany short-term loans becomes far less important.

  • You’re Covering Medical Expenses

    Taking care of your health is extremely important. If you have urgent medical needs that you can’t cover with your current pay, it’s probably worth it to risk the interest rate and take out the loan. You’ll be able to cover your expenses, take care of your health, and break up the loan payments.

  • When Not to Take Out a Short-Term Loan

    The above examples are just a few of the situations in which it would be worth risking the higher interest rate to take out a short-term loan. However, there are some situations in which you should almost never take out a short-term loan.

    • You Can’t Pay it Back – If you know you can’t pay back the loan on the scheduled date and you’re unable to negotiate an agreeable fee schedule, try not to take out the loan. You will end up buried in interest charges and fees.

    • The Need Isn’t Urgent – If you’re taking out the loan because you’d like a few hundred extra dollars, but you don’t need the money right away for an urgent matter, it’s probably best to wait.

    • You’re Using The Loan to Pay Debt – Unless you’re in a situation where you have to pay your debt or be faced with extreme consequences, it’s never a good idea to pay off debt with more debt.

Always try to find a way around taking out a short-term loan. These loans should only be used in extreme situations after you’ve exhausted all other options.

Don’t forget that you can usually negotiate a payment plan with a representative if you need a loan but can’t pay it all back at your next pay day.

Weigh your options; if you’d be in a worse situation without the loan than you would be having to pay it back, it’s usually worth the risk.

Author BIO

Tricia is a mom and a blogger from Beverly Hills. She recommends Capital City Loans in Sacramento for your short-term money needs.

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