For many consumers, the thought alone of a short-term loan is enough to scare them away. The only thing they think about is the larger monthly payment typically associated with this type of loan.
While it’s true that your monthly obligation will be more, as a result of the shorter term, that doesn’t mean it’s without a long list of benefits.
As a consumer with excellent credit, you’re in position to quickly and successfully apply for and obtain a short-term loan. With a high credit score and strong history, lenders won’t have nearly as many reservations about working with you.
Now it’s time to answer the most important question: what are the benefits of a short-term loan?
Here are five reasons to learn more:
1. Pay Less in Interest
The longer you owe money to a lender the more you’ll pay in interest. So, it goes without saying that a short-term loan allows you to reduce the amount that you pay out over the course of your loan.
2. Lower Interest Rate
In addition to paying less in interest as a result of a shorter term, you’ll also save because of a lower rate.
Not all short-term loans have a lower rate than other types, but remember this: with excellent credit, you’re more likely to secure a competitive rate.
3. Easier to Manage
One of the primary concerns of a long-term loan is an inability to manage it over the course of several years.
For example, if you take out a personal loan for five years, there’s no way of knowing if your financial situation will change sometime between now and your final payment.
This isn’t nearly as big of a concern with a short-term loan product, as you’re making payments for 12 months or less. It’s much easier to plan your finances over a period of months, as opposed to years.
4. A Boost to Your Credit Score
It may not be something you’re looking for if you already have excellent credit, but it’s a benefit nonetheless.
As long as you make payments in full and on time, your loan will have a positive impact on your credit score.
5. No Collateral
With some types of loans, such as a home equity loan, the lender requires collateral. As a secured loan, if you neglect to live up to your end of the contract, the lender can repossess your property.
A short-term loan doesn’t require collateral, which takes a lot of risk out of the equation.
It’s no easy feat to achieve an excellent credit score, but once you have it in your financial arsenal you’ll feel better about the future.
If you need money fast, such as to fund a home improvement project, consider applying for a short-term loan. As long as the benefits align with your goals, it may be the perfect financial product for you at this time.