The Benefits Of Choosing Short Term Loans Over Credit Cards
by Albane Francois
If you need access to a bit of extra cash quickly, it can be quite tempting to reach into your wallet and pull out a credit card to complete your purchase or get a cash advance. However, there is a better option for your short-term financing needs. This option is the use of a short-term installment or personal loan. There are several reasons why these loans present a better financial option. Please keep reading to learn about a few of them.
#1: Lower Interest Rates
Lenders consider a variety of factors when assigning an interest rate to any loan product. For instance, lenders will consider your income level, your credit score, and any pre-existing relationship you have with their company. Consequently, no set interest rate is associated with every installment loan or credit card. With that being said, short-term loans do typically offer lower interest rates than credit cards. This is especially true when discussing the use of credit cards for obtaining a cash advance. What this means for you is that you can save a significant amount of money by choosing to obtain a short-term loan rather than using your credit card to gain access to the funds you need.
#2: Improve Your Credit Mix
One of the factors that goes into determining your credit score is your overall mix of credit accounts. Utilizing a good mix of different credit products helps to show lenders that you are financially responsible and able to manage multiple obligations. This can help you to secure larger loans in the future, such as a mortgage or auto loan. Credit cards and installment loans represent two different types of credit accounts. While short-term loans are considered installment loans, credit cards are considered revolving lines of credit. Choosing to obtain a loan rather than using an existing credit card account will allow you to improve your credit mix and therefore raise your credit score.
#3: Longer Repayment Terms
Credit cards typically give you a very short amount of time to pay the balance before interest starts to accrue. While this is not a problem if you just need to borrow a couple of dollars for a few days, this can lead to a large amount of debt if you are not able to pay off the balance quickly. With short-term loans, you will be able to pay off your loan over a longer period of time than with a credit card. While these loans are still meant to be paid off rather quickly compared to larger loans, the repayment terms associated with a short-term loan can be much longer than with a credit card cash advance. For many people, this longer repayment term can help to minimize the chances of them defaulting on their debt.
For more information on short-term loans, contact a professional near you.
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About Me
How many times have you put off making repairs around your home because you didn't have the money to make them immediately? Have those decisions caused even more repair bills because you waited to make the repairs? I have done this several times in the past, and, oftentimes, not making those repairs have cost me far more to complete because the damage spread. The whole reason I created my blog was to help others find the financing they need to make home repairs without worrying about choosing the wrong type of financing option. Hopefully, my hard-learned lessons will help you avoid the same struggles that I have undergone.