Short-term cash advance loans tend to get a bad rep. Often you’ll read posts about how the high-interest rates and quick repayment requirements seem to dig consumers further into debt than necessary. While this can be true for those who borrow irresponsibly or for non-emergent reasons, the truth is, short-term installment loans can be a lifesaver when you need them most. To give you a better idea of when using a loan such as this is appropriate and when it isn’t, check out these scenarios below:
To Avoid a Late Payment
Making timely payments on a loan or credit card is imperative to your credit. If you’re a bit tight on cash but have a payment coming up, the best option may be using a fast cash loan to cover the bill. Taking out a small, $100 or $200 loan as long as you have the funds in your budget to repay the loan should be fine and won’t cause you any financial strain. In fact, it will prevent you from getting a negative rating on your credit report.
To Pay an Insurance Deductible
Insurance is a convenience that most people have. It’s great to use when something goes wrong as it can cover a lot of the out-of-pocket expenses for you. However, most insurance policies require you to pay a deductible prior to them covering your expenses. So, if you were in a car accident, had a home repair, or experienced some sort of medical emergency this could set you back several hundred dollars. During this time, it would be advisable to use a cash loan to cover the cost of the deductible so that you can get those damages repaired or medical expenses paid right away.
When Not to Use a Short-Term Loan
Now that you have some idea of when it is best to use a cash advance loan, here are some instances in which it doesn’t make sense and can cause you serious financial hardship.
When You’re Seriously in Debt
Everyone falls behind on their bills on occasion and may need a little help getting back on their feet. However, if your bills far outweigh your income and you’re up to your eyes in debt, it is never a good idea to accumulate more debt. If you’re unable to fit the loan repayments into your monthly budget, you should not apply for a cash advance. Although the funds would help with immediate needs, in the end, you’ll default and end up having a lot to pay back and a ruined credit score. You should instead look for resources to help.
To Purchase a Big Ticket Item
Short-term loans should only be used for emergencies. While it might be tempting to take out a loan so that you can buy an electronic device, go on a shopping spree, or purchase some other leisurely item, this is a big mistake. First, most short-term loans are only for a few thousand dollars. Secondly, they have to be repaid in a timely fashion and may not fit into your budget if you’ve borrowed a large amount.
It’s great to be able to get your hands on some cash when you’re in need. Despite what your credit background may look like there are lenders willing to provide you a helping hand. If you decide to apply for a short-term installment loan or cash advance, be sure that you do so for the right reasons. Taking out an emergency loan for reasons other than an emergency or when you’re in serious debt could work against you. However, when used correctly and repaid timely, a short-term loan could be the lifeline you’ve been looking for.