The Real Cost of Short Term Loans


Short term loans can be financial life savers when you find yourself in a financial fix. These loans are usually easy to apply for and quick to get, making them the perfect solution for emergency needs.

However, some of these lending products come with a high price tag that can actually dig you into a deeper financial hole. It is important to shop around when searching for emergency loans to ensure you get the best deal in financing and the right terms for your needs.

Consider these tips to help you evaluate the real cost of cash loans, ensuring you make the best decision for your personal budget.

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Application Fees

While most lending products come with an array of application fees, you may or may not find these charges with short term loans. Because it is not a given that you will have to pay anything to apply for these loans, it is advantageous to shop around for the lending companies that do not assess application fees. Ask about fees for credit reports and other potential charges as well, so you don't end up spending more than you planned to get cash in a hurry.

Finance Charges

Every loan comes with finance charges or an interest rate, which is the cost you pay to borrow the money. Short term loans tend to come with higher interest rates than other types of lending products. However, you can save a significant amount by shopping the rates to find the best deal. Make sure you are comparing apples to apples by figuring out the real cost of the finance charge for each loan and making an even comparison.

Payment Options

The real cost of short term loans is directly affected by the flexibility of repayment options that come with the products. For example, if you pay a loan off early, you will pay much less in finance charges than if you pay off the loan slowly in minimum monthly amounts.

Look for an emergency loan that allows you to pay back the balance in full any time you like, without a prepayment penalty. This puts you in the driver's seat in determining exactly how much you want to pay on your emergency funds.

Consider the Alternatives

While the cost of short term loans may seem high on the surface, consider the alternatives. If you don't get the loan and you end up bouncing checks, will the cost of overdraft charges be higher than the finance charges would be on the loan? If you can't pay your bills on time and you end up with late fees, will those late fees be more or less than the cost of an emergency loan? In some cases, the finance charges on the loan will total much less than other charges you might be assessed if you don't apply for the money.

The cost of short term loans varies, and it pays to around for the best deal. When you take the time to weigh the cost of a loan, you can get the best lending product for your individual financial situation.


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