Short term loans can be helpful for those that who are struggling to get a loan. They are one of the few financial solutions available that can help those with bad credit when in need.
A short-term loan is a loan for a small amount that is repaid over a short period of time. Usually from a few days to a couple of months (not more than 1 year), all depending on the lender’s terms.
Most people use this type of loan to cover emergencies or shortfalls on bills. The fast application process makes it possible to access cash the same day you apply. That is why it’s an attractive solution for people who need money fast.
Compared to long term loans, short term loans do have a higher interest cost and we will explain why. Short term loans offer a last resort for people who have bad credit and do not qualify for a long- term loan. Your credit score is a 3-digit number that sums up your entire credit history. All your payment decisions from the past get recorded on your credit record. When your score is low, personal loan lenders will not grant you a loan because they consider you high risk. This is where short term lenders step in and help clients that they can. They take on clients with low scores, providing they can see the client can afford and repay the loan. In return for working with “higher risk” clients, they charge higher interest to compensate for the risk they accept.
How you can use short term loans to rebuild your credit
Your repayment history on your debt makes up a large part of your credit score (around 35%). An overdue account will drop your score and affect your chances of taking out new credit. If you want to increase your score, you need to do the opposite and show a good repayment history.
This is where short term loans can help those with bad credit. By making a good impression on a short -term lender, you can get them to show good faith in you and grant you a loan. If you honour your agreement and make your payments on time, you will be able make up for a bad payment history and improve your score. This can help you to rebuild your name so you can qualify for a long- term loan in the future.
Common mistakes to avoid with short term loans
Taking out a short-term loan can be a quick decision you make to cover emergency expenses. We recommend that you don’t let the ease of the application process lead you to commit any of these common mistakes:
- Taking out too many loans. Once you have repaid a short -term loan, you may get tempted to take out another one. But do so responsibly. Try reducing your loan slightly or discuss with your credit provider different options to ensure you don’t become over-indebted. Taking out several short -term loans can be a sign to prospective lenders that you are in a stable financial position. It doesn’t matter that you are repaying the loans on time. The fact that you need to take out so many loans to begin with may not be a good sign for lenders.
- Not making your repayments on time. If you miss payments or make late payments, then you will do more damage to your credit record. The goal is to use a short- term loan to show lenders that you have learnt from your mistakes and can manage your payments. If you fall back into old habits, then you will get the same result make your debt situation worse.
- Making several applications in a short space of time. If you are not approved for a loan, you should avoid making too many applications within a short period. All applications show up on your credit record and lenders take this into account when assessing your application. Making several applications can state that your finances are not in good standing. Its best to wait at least 90 days between applications so you do not affect your score.
We work with a private lender, registered with the NCR. All our applications get individual attention to ensure we help as many clients as possible.
We provide this type of loan for clients that have bad debt and do not qualify for a personal loan.
We are here to help you get back on your feet. If you work with us, you will be able to make up for your bad payment history in the past.
To find out if you qualify, please complete our application here: https://jkmsloans.co.za/short-term-loans/