Going for short-term loans is always seen as a convenient way to get funding throughout difficult financial times. However, there are certain types of short-term loans, which should be avoided, and only resorted to when there is no other option available. These loans come with very high interest rates or occasionally; the collateral demanded is just outrageous.
Here are some of the short term loans you must avoid:
Most people love payday loans because they offer a practical solution when you run out of finances before you get your salary. Though convenient, these loans come with very high interest rates, estimated to be nearly 400% annually. Besides, the rollover fees, which are very high, there is a possibility that you will pay for the loan amount many times over.
This is another notoriously awful loan to consider. You borrow at very high interest rates, sometimes up to 300%, and the catch is that the loan must be repaid within 30 days, and if you default, then you risk losing your car – an asset that you have fully paid for. That is a very bad idea, and should be avoided at all costs.
With pawnshop loan, you deposit an item such as a camera, a bike, a piece of electronic etc. as a collateral for the loan. These lenders don’t just offer high interest rates, but they also charge storage and service fees, which normally end up driving the rates, sky high. As a result, most people will end up forfeiting the items they pawned instead of repaying the loans.
These may sound appealing because you already have a relationship with your credit card, they are instant, no paperwork is required, and you don’t have to sit down and have an uncomfortable conversation with the credit officers. But the catch in these advances, is the high fees, and interest rates. Experts advise that these loans should be a last resort, and only when you are in a dire situation out of town, where you need a service, but the provider won’t accept your card, such as when your car breaks down out of town, and the mechanic won’t accept a credit card.
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