Life throws financial curveballs, and sometimes a short-term loan can be a lifesaver. But before you jump in, it’s crucial to carefully consider why you need the money and, more importantly, how you’ll repay it.
As Niresh Gopichand, Atlas Finance Risk Director, advises: “In today’s economic climate, it’s tempting to rely on loans to make ends meet. However, unchecked borrowing can quickly spiral out of control. Short-term loans are designed for unexpected expenses like fixing a leaking roof, small home improvements or temporary cash flow gaps for example unforeseen medical expenses.”
Gopichand adds that when managed responsibly, short-term loans can provide much-needed relief and peace of mind.
Here are five key considerations to keep in mind before taking out a short-term loan.
Purpose and need
You can rely on short-term loans for the right reasons. Carefully assess why you’re considering a loan and assess your requirements and borrow only what you need: borrowing more than needed may tempt you to spend the additional money unnecessarily.
Eligibility and requirements
Before applying, ensure you meet the eligibility criteria, which often include being at least 18, having a bank account and ID/passport, and proof of steady income. Each lender may have additional requirements, so it’s wise to research and compare.
Regulated compliance
Check that your chosen credit provider is registered with the National Credit Regulator which ensures financial services providers comply with rules and regulations governing lending. It’s also important to carefully review the interest and loan terms and ask questions if anything is unclear. Double-check the fees and any extra charges associated with the loan to avoid surprises.
Pay back the loan
Understanding the loan terms allows you to budget effectively and ensure timely repayments. This responsible behaviour has several advantages including preventing debt accumulation. By avoiding late payments you prevent additional fees which keeps your repayment manageable. Responsible credit usage helps maintain a healthy financial standing and timely repayments demonstrate your credit worthiness leading to a higher credit score. This positions you favourably as a reliable borrower and helps in the future when seeking other financial products.
Use loans wisely
Be careful and only borrow what you need for essential expenses as the temptation with extra money sometimes is to spend on non-essentials. Short-term loans should serve as a temporary fix for emergencies, not as a source for non-essential purchases. Prioritise responsible borrowing and explore all available options before borrowing.
PERSONAL FINANCE
