Money Management

Understanding What Short Term Loans Really Cost


If you are in some sort of financial difficulty, a short term loan may just be the helping hand you need. These types of loans are often easy to obtain, regardless of credit status and can, in the main, be arranged online. Hence, they are perfect for emergency situations. On the other hand, you have to be aware that these are often costly loans, so you do have to make sure you research all your options before putting in any kind of application. Hopefully, the following information will help you to make sure you actually get the best deal and understand what you are paying for.

The Application Fees

Most financial products have an application fee as standard. Interestingly, this is not always the case with short term loans, although it can be. Because you can’t know for certain whether or not there is an application fee until you actually look into the product, you need to shop around. Ideally, you will find a company that does not charge you a fee. If they do charge fees, it is generally to cover the charges of checking your credit file, which many short term lenders do not actually do.

The Finance Charges

All loans have finance charges, which you may know as the interest rate. This is your fee for actually borrowing the money and how the lender makes their money. Generally, you will find that short term loans have higher interest rates than other loans. However, there are huge differences between the various lenders, so you need to make sure that you shop around in order to find the one that offers the lowest finance charges. The lower the charge, the less you pay after all.

Payment Options

Most short term loans only run for one month. Many do offer you the option of rolling it over by one month, or more, in which case you only pay interest for that month. However, due to the incredibly high interest charges on these loans, this is a very bad idea. Do make sure you check whether there are any potential early repayment charges. If you can pay the loan back early and this means you also pay back less interest, then this would be a really good idea.


Borrowing money is always expensive. Hence, if there are any alternatives to turning towards a lender, you should consider it. Perhaps you can borrow money from someone you know, in which case repayment will be far more flexible and you may not have to pay any interest at all. Perhaps you have valuables that you could sell, such as a vehicle, antiques or jewelry. It is always a better financial decision to not borrow money, unless you are trying to rebuild credit and are simply applying for a loan to demonstrate that you will pay it back.

Hopefully, this information will have helped you to make a sound financial decision in terms of applying – or not applying – for a short term loan.

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