Short-term financing is generally decried because it comes with high interest rates. However, it is often the only solution to get out of an emergency and avoid worsening your finances and consequently your credit rating. Here are the main advantages of short-term financing.
A way to deal with the emergency
When you have a bad credit and you have to pay a huge energy bill, repairs on your car, health costs or even credit terms, short-term financing is generally the only one accessible solution. Admittedly, this type of loan carries significant interest, but it does not make the situation worse by avoiding:
Deprivation of his means of transport to go to work
The worsening of a state of health requiring care
Non-payment of credit or card installments
Payments of penalties and fees that arise from an unpaid bill or a default.
A loan accessible without a credit check
Another positive aspect of short-term financing is that it is available to people with bad credit, even those who do not own their homes. Indeed, if conventional banking institutions refuse to grant a loan to borrowers with a low credit rating, private brokers and lenders can grant them loans provided they demonstrate a stable situation and their capacity to keep this new commitment. In addition to dealing with emergencies, this type of loan can also be used to finance repairs to your apartment or house, the purchase of a new vehicle, studies or even vacations, without the need to provide no supporting documents.
With short-term loans, debts are paid off quickly, making it possible to pay as little interest as possible, although interest rates are high. It also means that once the loan is settled, the person with a bad score has the opportunity to start rebuilding their credit immediately. To accelerate the increase of her score, she can in parallel request a personal loan, a line of credit or a credit card with deposit as security and only use it within the limit of 30 to 50% of the maximum authorized.On the one hand, she must review her budget, focusing for example on limitingher debts, including mortgage and car loan, to 30% of her income, avoiding asking for new credits and limiting the use of her credit card to a third or even half of the authorized ceiling so that it produces only a beneficial effect and allows points to be regained on its rating.
Short-term financing is not suitable for all needs. On the other hand, it is the ideal solution in case of urgent need of money and often the only option for people with a bad rating. In addition, as it is repaid quickly, not only is his interest limited, but in addition, once it has been settled, it allows him to start rebuilding his credit over the long term.