When you’re hit with an unexpected emergency, you need cash fast, which may be a problem if you don’t have enough in a savings account and if you don’t have good credit. Applying for a short-term loan online is one way to get cash to handle an emergency situation, but it may not be a good idea for any other reason. Here are the pros and cons of online short-term loans.
How Does an Online Short-Term Loan Work?
An online short-term loan is a type of unsecured personal loan you can apply for online. These loans have a short repayment term and an application may be processed much more quickly than it would if you applied through banks or credit unions. You may be able to get cash fast even if you have poor credit, but you’ll also have to repay it fast.
Pros of Online Short-Term Loans
There are a few things that may make online short-term loans a good solution to help you handle tough times. A few pros include:
- The application process is very quick
- You may be able to receive funds almost immediately.
- You can fill out an application online any time day or night instead of waiting for a bank to open.
For some people, the biggest benefit of online short-term loans is that good credit is often not a requirement. If your application for a personal loan at a bank was declined, a short-term loan online may be approved, allowing you access to cash even if you have credit problems.
Cons of Online Short-Term Loans
There are several reasons applying for an online short-term loan may not be a good idea if you have other options. Cons of this type of loan include:
- Interest rates are usually very high.
- There may be a variety of fees charged, which can add up quickly.
- If you’re trying to build credit, the lenders may not report your payments to the credit bureaus.
The fact that the loan needs to be paid back quickly may also be a drawback. You may have a situation that isn’t fully solved in a matter of weeks or months, and you may struggle to pay the loan back especially if fees accumulate. The bottom line is that an online short-term loan may help you get through a crisis, but it’s not a good long-term solution.
Building or Rebuilding Credit
To avoid having to rely on short-term loans with high-interest rates and fees, work on building or rebuilding your credit. A secured credit card can help you start to build a positive payment history. Always make your payments on time and keep your total debt as low as you can.
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