Short-term loans are used by many to help top up their income to deal with unaccounted-for emergency fees, like urgent home repairs or medical bills. And with a range of options to choose from, it’s easy to see why. Quick loans allow you to handle your finances easily in a pinch, with terms and conditions to suit you. Below, we’ll take a closer look at some of the risks and rewards that come with short-term loans.

Short-term loans: What you need to know 

What is a short-term loan? If you’re not familiar, the clue is in the name. A short-term loan typically has a repayment period of less than a year. One of the most popular types of short-term loans is a payday loan designed to help you stretch your income further, allowing you to cover emergency costs like urgent vet bills or home repairs you’ve not accounted for in your budget. These loans are offered typically by online lenders and are available to everyone – even if you have struggled to manage your money in the past, resulting in a low credit score. You can choose from a range of lenders and loan amounts, making them an option if you need to cover a range of emergency expenses. 

The rewards of short-term loans 

When trying to weigh up whether short-term loans are the best option for you, you’ll need to think about both the risks and rewards that come with this type of loan. First, we’ll look at some of the positive points of short-term loans to help you make your decision. 

• Easy Application: Because the lenders that offer payday loans are based primarily online, you can benefit from an easy application process. All you have to do is find a lender that provides requirements to suit you and fill in a short application online. You can do this from the comfort of your own home, with a few pieces of information to get the ball rolling, like proof of income, employment, and address. 
• Fast Approvals: Short-term loan lenders pride themselves on having fast approvals, and this is arguably one of the most important factors when looking for loans that can help in an emergency. Different lenders offer different approval times, some in less than 24 hours – perfect when dealing with an emergency. 
• Flexibility: You can choose a range of lenders, loans, and terms to suit you depending on what you’re using your cash for. All you have to do is research lenders to find a variety of loans to suit your needs and circumstances.  
• Lenders: There is a wide range of lenders to choose from so you can benefit from the loan amount that you’re looking for, whilst benefiting from great service, terms, and rates to suit you. All you have to do is take the time to look for them! 

The risks of short-term loans 

Whilst short-term loans can be a great way of financing any cash flow issues when facing an emergency, there are risks that come with taking out this type of loan. Here are a few of the most notable risks that you should be aware of: 

• Short payment period: With short-term loans come short-term payment periods. Because of this, it can be hard to repay your loan on time, especially if you’re choosing a payday loan. It can be difficult to get a handle on this type of debt, and you may risk defaulting or building up additional fees. 
• High-interest rates: Short-term loans have higher interest rates. This tends to happen as it becomes more of a risk that lenders may not get their money back over such a time. They also tend to be high as those with bad credit are also able to apply, who are regarded as risky borrowers. 
• Credit score: Because short-term loans can be harder to pay off in a short time frame, not being able to make repayments and defaulting means your credit score will deplete. This will also show on your credit report and make it more difficult to be approved for additional finance in the future. 

Choosing a reputable lender

If you’ve weighed up the pros and the cons and you think a short-term loan would be the best option for you, the next step is to find a reputable lender. When doing this, there are a few factors to consider, such as researching and reading reviews. This is the best place to start, and you can do this easily online with the help of comparison platforms. You can read reviews from others that have used your chosen lender on their website, or a third-party website that offers this information so you can get a non-bias view of the service they provide. You should also compare interest rates and fees to ensure you’re getting the best deal for a loan that suits your requirements. To ensure you’re using a trustworthy lender, make sure you check if they’re regulated and legal.