A recent survey showed that only 43% of Americans have enough savings for unexpected emergencies, and 4 in 10 working adults have more credit debt than savings. Most adults in the survey also couldn’t cover living expenses if they missed a month of work.
If you have an unexpected financial emergency, it’s all too easy to feel overwhelmed. But the best thing you can do is take action. Your first step should be to look at options like a short-term loan. The key is learning more about the different short-term loans to determine the right loan for your situation.
Keep reading this guide to learn about short-term loans and how they can help you in a financial crisis.
There are many unexpected expenses that a short-term loan can be helpful for. The most common expenses include:
Before looking at a short-term loan, it’s best to consider all your options first. Depending on how soon you need the money, you may be able to make extra money and lessen the amount you borrow.
Do you have a special talent, or any way you can earn extra income during your free time? For example, if you have a knack for graphic design or writing, you could try to pick up a side project. If you have other talents or hobbies like sewing or drawing, it’s possible to generate an ongoing passive income.
Whatever you do, it’s best to make a solid plan and estimate how much extra you could make each month.
Another thing you can do is take an honest look at your monthly budget. You must look for ways to decrease your spending to save extra money. For example, how often do you buy lunch during the day at work? How often are you going out to eat in general?
Cutting food costs is one of the easiest ways to cut expenses. Instead of buying lunch at work, bring food instead. Meal planning and creating a menu will allow you to have meals ready to go, decreasing the chances of going out to eat last minute.
You should also focus on decreasing your electricity usage. Turn off the lights when you leave the room, and unplug appliances when they’re not in use. Consider swapping out regular bulbs for high-efficiency LED bulbs.
Finally, use a personal finance app to learn more budgeting tips for saving money each month.
If you have a low-interest or 0% interest credit card, you can pay the balance down to make room for other expenses. In addition, you can see if increasing the credit limit is possible.
You’ll need a good credit score, stable employment, and a good payment history to increase your limit.
However, this option may only give you so much, and you’ll end up with a higher monthly payment. Ultimately, if you need to borrow more, it’s best to look at short-term loan options.
Your next step in this process is to learn more about short-term loans and what they involve.
Short-term loans are loans that typically require no collateral, and you can usually borrow for a period of up to a year. However, many short-term loans have shorter terms, sometimes weeks to months.
It’s essential to be aware of the different types of short-term loans available. This will help you determine which loan is best for your particular situation.
Common short-term loans include:
Car title loans are a specific type of short-term lending that allows you to use your car as collateral. Remember that you can only use your vehicle for this loan if you own it outright.
Car title loans allow you to borrow between 25 to 50% of your car’s market value, and the repayment window is typically between 15 to 30 days. Loan amounts range from $100 to $5,500.
Interest rates on car title loans are usually high, with most people paying an annual percentage rate of 300%. This translates to a $250 fee on a $1,000 car title loan, plus any additional lender fees.
Additional fees can include document and processing fees, so you must read the fine print.
You’ll need a photo ID, proof of insurance, and a clear title to apply for a car title loan. Some lenders may also require a set of keys. You don’t usually need to go through a credit check for car title loans.
In addition, some lenders may also require recent pay stubs or other documents that prove you can repay the loan. You may also need to provide the names and numbers of two valid references.
Although car title loans can be a good emergency loan option to pay off a debt quickly, you do need to be careful. If you cannot repay the loan by the due date, it gets rolled over into a new cycle, and you’ll pay more fees.
Ultimately, if you can’t keep up with your payments, the lender can take your vehicle and sell it to get their money back.
Payday loans are another short-term loan option that gives you access to fast cash. Payday loans are small loans, typically less than $500, but some lenders allow you to borrow up to $1,000. They also have high-interest rates of up to 650%, depending on your state.
Payday loans must also be repaid when you receive your next paycheck. Due to this, payday loans have a short repayment term, usually less than 30 days.
Many payday lenders don’t check your credit score. Instead, they’ll confirm your bank details and get permission to withdraw funds from your account when the payment is due.
To get a payday loan, you’ll need to be at least 18 years old and have a valid ID and social security card. You’ll also need to provide proof of income.
If payday lenders do check your credit score, you’ll typically still be able to qualify even if you don’t have a good credit score.
It’s important to realize that payday loans come with fees you can pay upfront or roll into the loan. These fees include:
Payday loans are suitable for people who need cash quickly and don’t have a perfect credit score. They also offer flexible repayment options and an easy application process.
Do your research to find a reputable lender and ensure you understand the fees and repayment terms.
Short-term instant loans or fast loans are online loans that give you cash instantly or within the hour. Depending on your credit score, these loans allow you to borrow more than payday or auto title loans.
The loan terms are also longer, usually around 12 months. However, you may be able to find short-term loans with terms of up to 24 months.
Many short-term instant online loans are available, so you’ll need to research to find a reputable lender.
To apply for a short-term loan, you must gather specific documents first. Since online loans are fast loans, you’ll only need to fill out one application form.
You can find the application on the lender’s website. You’ll need to provide basic information like your name, social security number, address, and phone number. The application will require you to provide a copy of an ID like a driver’s license or passport and your social security card.
You’ll then need to show proof of income to verify that you can repay the loan. Documents you can use include:
Proof of address is also necessary; you’ll need documents like a lease agreement, utility bills, or the deed to your home.
Some lenders may require a reason for the loan, but this isn’t always the case. Your lender will also check your credit score to determine if you qualify and at what interest rate.
Finally, you may need to provide your monthly expenses, including rent, mortgage, and other ongoing bill payments.
Although short-term loans can help you overcome a financial crisis, you’ll need to keep some things in mind.
If you have a poor credit score, you won’t get the best interest rate which can increase your monthly payments.
However, you can still get personal loans with bad credit, and making your payments on time can actually improve your credit.
Before taking out a short-term loan, think carefully about how much you truly need. Planning out your monthly payments and budgeting beforehand is essential so you don’t miss payments.
Now that you know more about taking out a short-term loan, you can make the best decision for your financial needs.
If you’re looking for a wide range of short-term loan options, you can turn to FastLoanDirect for your loan needs. We can provide options for loans up to $35,000 and different repayment terms depending on your credit score.
All you need to do is fill out one form, and we’ll connect you with various lenders and loan options.
Make sure to visit us online today to get started with the application process.