Short Term Loans Should be the Last Resort

November 24, 2009 |

In these tough times, many people won’t hesitate to take advantage of credit if only to meet their most urgent needs. Families with school children, single parents and even people who are working are among them. It cannot be denied that for the regular rank and file employees, the salaries they receive may not be enough to pay for their bills and other expenses.

Typically, people in need of urgent money have several options. Approaching family members such as siblings or parents is what most people do in the event that they run out of cash and have an immediate need for it. Family is often the first option.

Next to the family, people then seek friends for short term loans. They may be close friends or friends in the workplace. If these people are still not available, another alternative is getting an advance on pay from one’s employer. However, this may not always be possible as many employers normally require a valid reason from employees requesting for such cash advance.

Still another option is using the cash advance feature of a credit card. Most credit card companies offer cash advance to card holders apart from the credit limit. Keep in mind, though, that every time one avails of this feature, there’s an additional finance charge on top of your outstanding credit card balance. Be wary of the interest rate as well as it can be higher than the other available sources of funds. It’s recommended that card holders understand carefully the terms and conditions of this offer.

Credit unions are another source of fund. Loans can be availed from them although this is only possible if one becomes a member of the group.

If all these other options still fail, people have the short term lenders to assist them in their financial needs. A great number of these lending companies are now operating online to make it convenient for borrowers to apply for loans without having to travel back and forth.

What also makes these short term loans such as the cash advance and payday loans attractive to people in dire need of immediate cash is the fact that they don’t require credit checks and applications are approved in less time compared to applying the traditional way and borrowing from banks and other major lending institutions. Banks today implement higher interest rates and credit checks especially from high risk borrowers. They also ask for one or more collateral to protect them in case borrowers miss out on their regular payments or worse, default in their payments.

Experts recommend that people should not totally depend on short term loans in fulfilling their financial requirements. If possible, these should be made as the last resort when all the other alternatives fail.

If it’s inevitable that you avail of a payday loan or cash advance for instance, it’s best to make sure that you borrow only what you can afford to pay back using your next paycheck. Proper budgeting is very important when handling credit issues to avoid going into huge debt that may go out of control.

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24

Short Term Loans Should be the Last Resort

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