Financial emergencies are expected, but when they do occur, most of us find ourselves scrambling to make ends meet. Whether you’re dealing with unexpected medical bills, a sudden job loss or need quick cash for a car repair or other financial emergencies, applying for a short term loan can save the day.
Short term loans like payday loans are a great option when you’re in a tight financial spot and can’t afford to wait for your next paycheck or long loan approval processes. While borrowing cash can be a life saver when in financial need, it’s up to you to be a responsible borrower.
Before applying for a short term loan, there are few quick tips you need to consider.
How Much are You Borrowing?
When applying for a loan, avoid the temptation to borrow more than you need. This is one of the mistakes that borrowers make when applying for short term loans. You already know your immediate financial need so you should have an appropriate figure in mind. What you want to avoid is borrowing an amount that you can’t afford paying back.
Do You Qualify?
Lenders have the right to determine whether to approve a loan based on eligibility and other factors. It’s wise to check the eligibility terms of the loan to ensure that you qualify. Although most short term loans like payday loans have little requirements to meet, it’s always good to understand the requirements needed for a loan approval.
Your Credit Score Matters
While short term loan lenders may not necessarily check your credit score to approve your payday loan, it’s always wise to have a good credit score. Why?
- You’re more likely to get a higher loan amount
- Instant approvals for borrowers with impressive ratings
- Better chances of getting favorable loan terms
Understand the Fees
Most borrowers will only look at the interest rates charged and not bother asking about other fees. Yes, interest rates will help you determine if you can afford the loan but look out for hidden fees to save yourself from the extra burden of paying even more. Ask about the loan fees if any, and get clear information before applying.
It’s a basic rule always to consider affordability when borrowing a loan. A short term loan may seem payable, but without an effective repayment plan, you may end up in deeper debt, especially if you borrow multiple loans.
According to financial experts, affordability is a major issue because of payday loan borrowing habits. About a third of the average borrower’s paycheck goes into repaying loans, making it hard for borrowers to repay without borrowing again. Affordability must be considered when borrowing a loan to avoid the circle of debt.
Read the Loan Agreement
A loan agreement is what provides every detail you need to know about the type of loan you’re applying for. It should include:
- Interest rates charged
- The exact amount you’ll get in your account
- Expected repayment date and schedule
- Associated fees like late payment fees or penalties
Always read the loan agreement before signing it.
Getting Payday Loans Online
Statistics from Debt Rescue show a sharp increase in the use of payday loans among South Africans. This means that lenders are also on the rise, with online lenders becoming more popular due to their service convenience.
Getting payday loans online is not about picking any lender you come across. You need to find established lenders who offer loan products and terms that best suit your emergency financial needs.
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