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3 Things to Ask Yourself Before Taking Out a Short Term Loan

BY Rachel | 19 May, 2016 | no comments

Whether you love it or hate it, money is all around you. It was used to put gas in your car that you then drove to your day job to earn more money. The constant cycle of earning and spending seems to be here to stay, but are you managing your money in the best way possible? Unfortunately, every day countless individuals find themselves in a state of financial duress.

When you find yourself coming up short, whether it is for monthly bills, a family vacation, unexpected home or car repairs or even for weekly groceries, it is a stressful situation. While some turn to family for extra money, many others find themselves on the short term loan circuit. While short term loans can be a blessing in a time of need, there are many things to consider before you sign on the dotted line.

Evaluate the Expense

Before you decide to take out a loan to cover your costs, analyze the expense itself. For instance, is this purchase really necessary? Is there a cheaper option? How long will this band aid payment last you? Are you digging yourself a deeper hole for the long run? Remember that any debt is going to cost you more than it gives you and should not be taken on without careful consideration.

Consider Savings

In some cases, the large expense you are facing may be able to be put off until you have the money saved. With some car repairs, the mechanic will give you a certain number of miles you can drive before needing the repair. In that instance, perhaps taking the bus for a couple weeks while you save your pennies is a better option than taking out a loan.

Additionally, you may have savings but are hesitant to dip into them. The question is, are you paying out more in interest on this loan? Oftentimes, you will face large interest payments on short term loans that could be avoided if you simply dipped into your savings account. Spend the next few months repaying yourself and your savings account rather than paying back a loan with interest.

Ease of Repayment

If you are taking out a loan because you can’t make ends meet, you need to carefully assess when you can payback the loan. While payday loans will sometimes sound like a great deal, they could put you in a horrible sequence of constantly paying back loans and never living on your actual earnings. Your loss of money in interest will end up being astronomical this way.

Before you sign for your loan, evaluate how long it will realistically take you to pay it back, and whether you need to make additional lifestyle changes in order to get your finances back on track. Never take out a loan without a firm grasp of the length of your repayment time.

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