Perhaps your rent is a few days late, you have an emergency health bill to settle, or your car just broke down.
To make things worse, your rainy day fund is dry and your current bank account is, well, the less we talk about it the better! You could wait for pay day, but it won’t come around for another week or so.
To cut to the chase, you need money, and you need it now.
We’ve all be in such a situation; where we need a couple of hundred dollars to get out of a jam. More often than not, however, we don’t really take the time to evaluate whether we need the short term cash.
In this article, we’re sharing considerations you need to make before applying for that quick loan. Read on.
In need of a short term cash advance? Check out the top 5 things to consider before you apply.
1. Do I Really Need This Short Term Cash?
Not having a financial plan, living without an emergency fund and even marrying the wrong person are some of the reasons people end up in financial ruins.
Another reason? Taking up quick loans we don’t need.
It’s prudent to assess the reason you want the cash. Is it so urgent? Is it something you can drag on until your next pay day?
If you need short term cash to fix a broken car, that car better be your means to a living. Say you’re an Uber driver or a courier.
But if you need quick cash to fix a car to cruise around and run your errands, that can surely wait.
Not that fixing a broken car with a short term loan is a financial crime, but you really need to make sure you’re getting this loan to solve an urgent problem.
2. Do I Meet Approval Requirements?
Unless you’re planning to borrow money from friends or family, you’ve to take approval requirements into account.
It’s a well-known fact commercial banks love to play hardball with loan applicants. Even with an excellent credit score and proof of a steady income, every detail will be scrutinized, including your postcode. This delays the approval process.
But who turns to a bank for short term cash?
There are other lenders, such as payday loan providers, who specialize in making quick and easy loans to customers who don’t stand a chance in commercial banks.
This, though, doesn’t mean payday lenders don’t have approval requirements on their part. They do, but the approval strings are easy to pull.
In general, you will fill out your details in an online form, send over your bank statements, and wait for the lender’s decision. This typically takes a few hours.
As such, before applying for short term cash, it’s best to review your preferred lender’s requirements and ensure you meet them all. Making a speculative application when you know you don’t meet the requirements will only leave you more frustrated.
3. What Are the Interest Rates?
Sure, loans get you out of messy situations, but they come at a price. That price is the interest rate.
It’s simple math: You borrow $500 for a month at a rate of 20 percent, you’ll repay at least $600. We say at least because, depending on your lender, there may be additional charges, including same-day deposit fee and establishment fee.
Therefore, it’s in your best interest to research the interest rates offered by various short term lenders, and find the lowest.
That said, don’t necessarily settle for a certain lender because they offer the lowest rates in town, or online. Look around for testimonials of quality customer service and quick approval time before making the next move.
You also need to know the small loans ($2,000 or less) industry in Australia is regulated by the National Credit Act. Having a good handle on all the relevant regulations puts you in a better position to secure quick loans at friendlier rates.
You’ll also be able to catch dishonest lenders who might be looking to prey on uninformed or unsuspecting customers.
4. How Long Will I Need to Service the Loan?
So, you get your short term cash and sort out the issues.
Then the repayment journey begins. A few days or weeks down the road, you feel unenthusiastic about it. The loan’s due date is fast approaching, yet you haven’t got your act together.
Many borrowers find themselves in this scenario, not because they’re unable to service their loans, but because they took loans with short lives.
Of course, there is a psychological explanation for this lack of adequate decision making when borrowing money: When you focus heavily on one thing (getting approved for the loan), you’ve less mind to devote to other issues (like what happens after you get the loan).
To avoid this pitfall, start by forecasting your cash flow. Next, determine whether your future income will be sufficient to cover loan repayments and still keep you afloat.
If your finances will be tight, opt for a loan with a longer repayment period. It’ll cost you more, but you’ll have smaller repayment installments that fit your budget.
Short terms loans are typically repayable between 16 days and 1 year.
5. If I Can’t Pay Off, What Next?
If not well-calculated, a bad financial decision can quickly get from bad to worse, worst even.
Before bowing short term cash, evaluate the worst possible case scenario. What if you’re unable to pay?
Definitely, if you can get the nod from your lender, it does mean they’re certain you’re capable of repaying.
But life does happen.
Maybe you borrowed the loan against your job or your business. Unexpectedly, your employer drops the hammer, or a fire razes down your store. And just like that, you have no means to pay up.
When you default on your loan, the lender will keep charging you default fees until you pay it off. If the lender wants to repossess any good you listed as collateral, they must get a court order.
Making Short Term Cash Work for You
Many people, at one time or another, have faced a money problem.
If you’re in one, there is nothing to be ashamed of. Reaching for short term cash is an ideal solution, but you have to know whether it’s what you really need and be prepared for the potential consequences.
At Cigno Loans, we’re all about stepping in for you when other lenders won’t. As long as you qualify, we can offer you cash advances of up to $500. Check us out today!