Yes, Indeed. Though short-term personal loans may not help directly to meet long term goals financially short-term working can impact future growth. Short-term goals can have long term consequences. However, they have their set of disadvantages too.
Short-term loans can look like an enticing offer when you’re in an urgency. It’s simple to apply for a cash loan, get appropriate funds, and make payments in a short period of time. These loans can rescue your financial worries in times of emergency funds like house maintenance, medical treatment, etc.
However, short-term loans have their share of risk (high-interest rates/ shorter repayment tenure/ cruel lenders). So, every risk must be calculated before taking action.
Let’s pivot our energy towards the benefits of short-term loans first:
Instant loans are much better than exhausting your hard-earned savings or exploring new credit cards, especially during emergencies. This can cost you a lot more than you ever thought! Most of them can be applied & approved online, at the comfort of your home. In fact, money is disbursed within a few hours only.
They are useful because they don’t have collaterals to support and high credit score for quick approval & larger sum. A short term loan from Home Credit can be easily applied with just 2 documents, one ID proof & another is a residential proof.
Due to the limited tenure, the long term financial commitments cannot be directly met. Long- term/ traditional loans are more suitable here. You get money, meet an end & pay it back! Simple!
For all your working capital needs for a small business, short term loans can easily serve the purpose.
Determents of short-term loans
Under a short term model, the repayments are compulsory within a short period. Lenders will expect their money within a month or a few weeks so you can generally meet your working needs with it. It is super essential to have a concrete plan to support a short term loan to avoid the ill-effects.
Usually, the interest rates on these loans are very high. If you do not return the loan amount within the principal amount within the stipulated period, then a considerable fee starts to mount. It can get even worse if the lenders practice dishonesty.
Clearly, these loans will backfire your credit score adversely also. Your lending institution may deliberate to make an inquiry on your credit status & as a consequence, you may be hoaxed. This is your credit score bears the brunt of a hard inquiry & thereby reduces it negatively.
Of course, short term loans are quite comfortable like it’s an amazing glue in a temporary dent. However, it comes with its own set of inevitables. The high charges, fees, interest rates, payback terms & conditions, etc. A tenure which can be as short as 2 weeks only. Every defaulted payment will negatively impact your credit score and cost you more monetarily (late fees, penalties, interest, etc) This creates a vicious cycle of giving & take which makes it difficult to break in. So, be very thorough with your groundwork in relevance to the loan options available in the market & the type suiting your nature of work.