While we often here write against turning to payday loan companies, there are a select few that do not charge upwards of 400% interest. With 34 million Americans not participating in the banking system, many of these same Americans are forced to look for alternatives to traditional loans normally granted by banks. No one can predict when an emergency will happen. Often times with emergencies come the need for emergency capital, such as when ones car breaks down or when ones beloved pet needs emergency veterinary care.
The one solid benefit of short term lenders is that they often times will work with someone who has poor credit, or in the case of many people, no credit at all. This can help build your credit, if the lender in question reports to the 3 major credit reporting agencies. You should always inquire if the lender does indeed report your good payment history, because if they do not do so, you are missing out on the opportunity to build real credit. If the lender does not report to the credit reporting agencies, you should look into another lender.
You should always factor in the true cost of any loan product, which goes beyond looking at a loans interest rate. You need to look at a loans APR, which factors in any fees that the loan will entail, such as the origination fee if any. These loans can carry a rather high APR, so if you have any other means to fund your short term cash needs, you would be better off financially speaking to take advantage of these other routes. That being said if you do need to resort to a short term lender, you can always build up your credit if you pay off your loan on time, so that in time you too can use a traditional lender such as a bank or credit union. If you have not yet tried a credit union, you should look into one, being a member of a credit union can open many doors financially, including the ability to obtain loans where normally a big bank may turn you down.
Short term lending, if used carefully, can help people to avoid late fees, missed rent payments and penalties. These type of loans can also help you to rebuild your damaged credit, or to establish a baseline of credit if you have no credit history. Even those with good credit may find themselves in a spot where they need instant cash now, and this is where these types of lenders shine, they offer the ability to wire funds directly into your bank account in as little as 24 hours, sometimes even sooner than that.
Not all short term lenders are payday lenders. Although the majority of internet search results will lead you to a payday lender when you enter in the term “short term lender” or “short term loans” there are 100s of lenders that operate differently. Many lenders will offer a fair, yet still high interest rate, with terms of up to one year. Some of these lenders are peer to peer lenders, while others are brick and motor lenders who have ventured into offering loans online. We feature reviews of many of these types of lenders directly on this website, listing both the pros and cons of each lender to give you a complete prospective on potential lenders. Be sure to read our reviews before committing to a lender.