Your financial life has been a bit messy. Maybe you lost a job and fell behind on some bills. Maybe you got a bit in over your head with your credit card debt. Maybe you declared bankruptcy recently. All these scenarios lead to the same result—a bad credit score. This puts you in a precarious position when it comes to borrowing money. Should you find yourself in a situation where you need an emergency cash infusion to hold you over until your next paycheck, your poor credit score will not stand in your way, provided you meet some basic criteria. Known as short-term loans, they can offer you the money you need to tend to your expenses. Here are a few things to know about these loans.
Basics of a Short-Term Loan
A short-term loan is a loan designed to ‘’tide you over’’ until you get your next paycheck. The amount of money you can borrow will depend on your income and the laws of your state. Regardless of the maximum allowed, you will typically not be able to borrow an amount equaling more than half your paycheck. Credit scores are not taken into account. Typical requirements include being employed and having a checking account. Some lenders may require that you have been at your job a certain amount of time. Many lenders also require you be paid by direct deposit, but this is not always the case. Some may allow for a pre-dated check to be cashed upon receiving your next paycheck.
Benefits and Drawbacks
short-term loans can provide a great solution to a temporary cash crisis when you are between paychecks, and do not have access to alternative sources of cash like credit cards or savings accounts. Because lenders do not look at credit scores, people with bad credit can easily get the money they need, provided they meet the other criteria set forth.
The major drawback of short-term loans is the exorbitant interest rates, which are in the hundreds of percent, sometimes over 1,000. Because of the small amount of the loan and its short-term nature, this does not translate to a huge sum. But, these high fees make this type of loan undesirable for any sort of long-term solution to your financial problems. If you are unable to pay back the loan in full in a timely fashion, these astronomical interest rates will really start causing you problems.
Choosing a Lender
Short-term lenders are regulated by state and federal laws, but this does not automatically mean they are all reputable. If you are in are searching for ‘’instant loans bad credit’’ on the internet, you will find no shortage of companies that will happily give you the money you seek. You are a bit desperate for money and you may simply go with the first lender you find, assuming they are all the same. First, check the requirements for being offered a loan—companies that have more stringent requirements for lending, such as requiring a permanent address and a landline, are often a good bet because this suggests they are on the up-and-up and are following the rules. Investigate the terms of the loan, including the interest rate and any other additional fees. Be wary of companies that do not have at least a full address, email and contact number. You should be easily able to reach someone on the phone. Do not be afraid to ask questions—reputable lenders will be happy to answer them.
About the Author: Kelli Cooper is a writer who enjoys blogging about all matters of personal finance.