The holiday season is quickly approaching. A large number of people are scrambling looking for a way to purchase gifts for friends and family. Many of those people are desperate because of their bad credit or financial situation. One popular option is to take out a short term loan for the holidays. Short term loans are very similar to a cash advance. The loans sound like a practical idea on the surface. However, many people report that they might have a few drawbacks.
Short Term Loans
Short term loans are designed for people in a financial crunch that need money fast. This financial need might be due to other money obligations, an emergency, or a celebration. The applicant fills out a form and the loan is approved. The loaning institution adds on a few processing fees. The applicant agrees to pay back the loan in a few weeks or with their next paycheck. Thus, the name short term loan. Certainly, short term loans are gaining in popularity because of quick acceptance and payback. Traditional loans usually require a longer waiting period and installment payments over several years.
Applying for Short Term Loans
Gift giving season is a time that creates a flurry of activity at the short term loan sites. People are anxious to get their hands on cash to buy gifts. Reports show that loans for less than $400 are quickly approved. The process is very straight-forward. The applicant applies at one of the short term loan sites. They fill out the application. Submit details about their employment and supply information about their checking account. The lending institution submits details about the amount of the loan provided. The applicant approves. Once approved, the money is electronically transferred to the applicant’s banking account.
Short Term Loan Drawbacks
Short term loans carry risk. This is something that the consumer should know about before taking out the loan. The lending institutions provide the applicant information about repayment terms, but the applicant might fail to notice the fine print. Often, the fees paid for the short term loan is exceptionally high. The companies realize that the people filling out the application are in a desperate situation. They assume that many are willing to pay high interest fees while others simply are not aware of the fees. The fact is that the applicant might owe more in fees than their initial loan. The financial institutions are betting that some applicants are unable to pay off the loan as originally agreed upon. Therefore, they roll the fees over into a new loan and charge even more interest.
Certainly, short term loans are a financial life saver to some, but the loans also have their drawbacks. If you are searching for a personal loan, cash advance or installment based loan, then it is always recomended to review all of your financial options, go visit a credit union and make sure you never borrow more money than you really need.