With COVID-19 causing devastation to the UK economy, many people are looking at ways to ‘make ends meet’. This is especially difficult with a poor credit score! Short term borrowing such as payday advances can cause more problems than they solve. Especially if not used correctly. As big believers in the need for both responsible lending, and responsible borrowing, here we try to give advice on how short term loans should be used. Are Short Term Loans an Answer when you have a Bad Credit Rating?
Are Short Term Loans an Answer when you have a Bad Credit Rating?
It may be tempting for anyone with bad credit problems to think that a short term loan is an answer. After all, they’re available for people who would find it difficult or even impossible to find an alternative solution. However, they are fraught with danger.
The major problem with short term lending can be very expensive if used for a longer period of time. And typically they are designed for one or two months. If you keep ‘rolling over’ the debt, it can get very expensive, and a major burden.
Only for bridging a gap
A short term loan is designed to bridge a gap, and a date will be set at the beginning of the loan when it will need to be paid back in full. This will usually be your next payday. Hence the often alternative name of payday loans if less than £1000.
The real problems can start if you fail to meet the repayment schedule. Interest plus other charges can soon escalate out of control. Think about it. If you are having problems making your salary stretch to the next payday already (hence your debt problems) how difficult will it be to use a large chunk of salary on the loan? And still survive for the remainder of the month?
Desperation
It is pretty easy to get into the desperation borrowing cycle which can be exceedingly difficult to get out of and you can find yourself spiralling further out of control and into a sea of debt.
Thankfully most short term loans are now offered with repayment terms of up to 12 months, to suit your budget, so please analyse your income and expenditure carefully before applying.
Access to short term loans
Short term borrowing options are easy to get – that’s both an advantage and a disadvantage of them. It can be a great relief when you are desperately in need of a cash boost but can also cause real problems if you start to take out loans which you do not really need.
Don’t automatically head down this road without first exploring other options. How about:
- Having a clear-out and selling some unwanted items
- Cutting back on your expenses
- Asking friends or family for help – this may mean swallowing your pride but can also help to save a lot of worry in the future
If you can find an alternative to using a short term loan then you should consider taking it, to save paying any interest as with any form of lending. It may not be quite so quick, easy, and convenient at first but it really is good advice for many debt problems.
