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You can be the most organised person around and still not be prepared for an unexpected short term financial issue or need as life can highly unpredictable at times. There has been a growth in finance options over the last few years in particular and these days there are far more short term borrowing options and opportunities available, so here is a look at what questions you should ask yourself in order to decide whether a short term loan is suitable for your immediate needs.
Is the loan needed?
You may have an unexpected repair bill or need some extra money to help you through until your next salary comes in but whatever the circumstances you should still take a step back and ask yourself if you really need a loan today, before you decided to go ahead.
Short term lenders take their responsibilities very seriously and Ferratum are a good example of this as they promote responsible lending on their website and suggest you consider your alternatives in line with Australian Government requirements under the National Consumer Credit Protection Act 2009.
If you are trying to raise money to pay a gas, electric or water bill then try talking to your provider to see if they can agree to a repayment plan but of course some bills simply won’t wait, so as long as you have considered your options and decided whether you definitely need the loan or not, it is then something worth considering after you have at least asked yourself the question in the first place.
Responsible borrowing
In the same way that lenders are expected to practice responsible lending it makes sense that you should reciprocate by practising responsible borrowing which when it comes to short term loans, means only using this source of immediate finance for the right reasons.
Short term loans are often short-term solutions to a financial emergency and therefore you should only look to borrow the amount you need to cover the expense and then aim to pay back as quickly as possible. You should not consider taking out a short term loan for a holiday or simply to finance a night out, as these are things that you can budget for whereas an unexpected car or home repair bill is not something you can always budget for.
Short term loans can very often attract high rates of interest and are a financial service or product that is designed to provide an immediate short-term solution, which means they are very useful to many people but should be repaid within a short space of time also and not viewed as a long-term remedy to your financial requirements.
One loan at a time
You should work out how much you need to get you through your short term financial problem and pay the bills that are immediately pressing so that you can clear your borrowing including the interest at the end of the month or as soon as you know when the money you are expecting is coming in.
If you fail to budget properly and do not have the money to pay off the loan when you expected to, you need to contact the lender to work it out but the one thing you should definitely avoid is to take out another loan simply to clear the first debt.
Rainy days come along every now and again for many of us and short-terms loans can offer a solution to the problem, provided you understand what is involved and work out your budget so that you use the facility wisely.
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Personal Capital lets you see all of your accounts in one convenient place. Sign up now for free.William Dawson is studying to be a financier. He enjoys blogging about personal finance issues to help people make smart money choices.
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