Are Short Term Loans an Answer when you have a Bad Credit Rating?
With COVID-19 causing devastation to the UK economy, many people are looking at ways to ‘make ends meet’, which is especially difficult with a poor credit score!
Short term borrowing such as payday advances can cause more problems than they solve!
Is a short term loan really the answer?
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, but they are fraught with danger.
The major problem with short term lending can be very expensive, and typically is only designed for one of 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.
The real problems can start if you fail to meet the repayment schedule and 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?
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 spiraling further out of control and into a sea of debt.
For more on breaking this cycle, please take a moment to view the following video:
- To find out more about the ‘Cycle of Debt’, please check to the following article – Get out of the Debt Cycle. Get out of Debt and Stay Out
More cons than pro’s!
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. Hows 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 take it. It may not be quite so quick, easy, and convenient at first but it really is good advice for many debt problems.
- For some additional personal money-saving tips, please check out the following Which article – 50 ways to save money
Falling into substantial debt can be a traumatic experience that impacts all areas of your life.
Short term loans damage your credit file!
What many people do not realise, is that short terms ‘payday’ type loans damage your credit score!
This is because mainstream lenders take the view that these loans are a result of poor money management (even if this is not the case).
For more information see:
- Credit Score Improvement Guide – Chapter 8, How to use loans and credit, 3. Should I get rid of payday and other short-term loans?
Alternative longer-term solutions
If you can somehow avoid using short term loans, there are alternative longer-term solutions to consider:
- Building your credit score – this will give you access to cheaper loans, a larger overdraft, and a facility on your credit card.
- Longer more affordable loans – where the interest rates are lower and the monthly repayments can be more affordable. Get Quotes.
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