How to Make the Most of a Loan With a Short-Term Financing Company

This post comes in conjunction with a Personal Profitability partner.

If you’ve found yourself coming up short with enough cash to pay your bills one month, the good news is that you have some options. Consumers who have an emergency expense, such as a doctor’s bill, a car repair, or something else unexpected, can use short-term loans to help them make their finances work in these situations. Short-term loans are best for borrowers who need small sums of money to get by until their next paycheck. Here are some recommendations for those who use short-term loans.

Read the Terms First

It’s important to know what to expect with a short-term loan before signing for one and committing to the terms. Companies that lend money on a short-term basis provide literature that is essential to read if you want to avoid any surprises. Be sure to review all of the terms of your potential loan before making a commitment to borrowing any sum of money.

Shop Around for Interest Rates

The other key part of a loan that works for you is to make sure you understand the interest rate. The interest rate is the additional cost on top of the money you borrow. When paying your loan back, the lender will profit off of your interest charges, so it’s best to shop around for the lowest rate possible. Short-term loans usually have higher interest rates, but it’s possible to get a rate that works for you.

Check Your Credit Ahead of Time

Your interest rate and the terms of your loan are usually influenced by your credit. While short-term loan decisions are usually made in a day or less, you should take the time to check your credit before applying for one. In most cases, you can get a copy of your credit report for free online once a year. You can evaluate your credit and see where you stand before finding out from a lender.

Correct Errors on Your Credit Report

If you notice errors on your credit report, it’s essential to attempt to correct them. Corrections sometimes take many months, so this won’t impact a loan application you’re filling out right now. Problems on your credit report could potentially cost you much more money down the road when you need another type of loan, such as a car loan or mortgage.

Get Documentation Ready

Next, it’s time to get your documentation ready. Short-term lenders most often want to see your paystubs. Some lenders may also ask for more information, such as tax forms or bank account statements. It’s easy to find what you need if you keep everything organized ahead of time and make copies before you visit the lending branch for your short-term loan.

Borrow Only What You Need

Most credit and lending industry experts, like Don Gayhardt Of Curo, also recommend you only borrow the amount you need. A short-term loan is best used sparingly when you only need a little bit of cash to fulfill your financial responsibilities. Like any type of loan, your cost increases if you borrow more. Borrowing a small amount that is just enough to help you stay financially fit can be more beneficial than taking out a larger loan.

Make Timely Payments

Next, borrowers need to make sure they pay back the loan in the allotted time. Missing a payment or making your payment late can negatively impact your credit. For a short-term loan, a missed payment may also mean a higher interest rate or more penalties and fees that don’t help your financial situation.

Pay Off Each Loan Completely

It’s also important to focus on paying your short-term loan off completely as quickly as you can. You can try a variety of different payoff strategies if you have other monthly obligations and installment loans from various sources. This way, you don’t have to worry about taking out a second loan if another financial emergency happens. It’s better to get a clean slate and clear your debt burden as fast as possible to prepare to build up your savings over time.

Make Arrangements During Tough Times

Of course, sometimes consumers do experience another financial disaster before paying off their initial short-term loan. If this happens to you, and you’re unable to make your loan payment, talk to your lender to see about an extension or some other type of arrangement. Not all companies will agree to change the terms of your loan for a short period of time, but it is worth a shot to at least ask.

Budget Your Expenses Effectively

Finally, as you navigate the ins and outs of short-term loans, it’s vital to develop a plan to budget your monthly expenses more effectively. See where you can cut costs on your daily spending, and look for ways to add more into your pocket each month to help.

Before going forward with a short-term loan solution, make sure you follow the steps for an optimal experience. This way, your finances have a better chance of improving for the long term.

This post comes in conjunction with a Personal Profitability partner.