Top 5 Do’s and Don’ts of Short Term Loans in Canada

• October 29, 2017

Short term loans, sometimes known as cash advances, have always provided a quick solution for millions of Canadians to get funds on short notice. It should be understood that this form of credit is helpful, but always expensive, and, should be used with a great degree of responsibility. If not managed properly, short-term loans can be the fastest route to your financial misery.

Here are the top do’s and don’ts worth having in mind if you are considering this type of lending in Canada:

Don’t take more than you need

When you decide to go for short term loans, you are probably in a financial fix and you need a specific amount of cash to wade your way through. This is not the time or the type of lending to use for purchases that are unnecessary, or use to finance any form of luxury such as a pricy vacation. Simply apply for the specific amount you absolutely need.

Have a budget before applying

Before you submit your application for the loan, be sure that you already know how you are going to spend the whole amount. If you need it to sustain you until the next paycheck, outline the specific areas of expenditure to avoid wasting it once you have it. This will not just help you apply for the amount you need, but will also reduce your chances of spending it inappropriately.

Don’t just make minimum payments

Unless you truly can’t afford to pay more, then make minimum payments. If you happen to have additional funds elsewhere, strive to pay more towards the principal amount. This will help you clear the loan and eliminate this debt.

Don’t use the loan to pay off another loan

This is the same case of digging a hole to fill a hole. The danger in this habit is that you will never have enough to pay all the interest accruing from this cycle. Besides, it becomes very difficult to break away from, and you may be trapped in it for a very long time.

Understand the terms and conditions

Most people sign the fine print after being verbally advised on the terms by the lender, but you should know that the lender may not tell you everything you ought to know. They are in business, and their first objective is to cover their investment. Therefore, be sure to go through the fine print when taking a short term loan so that you have a good understanding of what exactly you will be getting into.