Hit with an unexpected emergency expense when money is tight? A short term installment loan may be able to help. You may be able to get the funds you need quickly, so you can tackle your emergency, sometimes even if you have bad credit.
When is a good time to think about applying for a short term installment loan?
With a relatively short time to pay it all back and the potential high interest rates and/or fee, it may not be a catch-all solution for every financial emergency.
While it’s likely a good idea to look for ways to reduce your monthly expenses moving forward, you’ll still need to decide if borrowing money to help you manage your emergency is the right call in the short term. Read on to learn more about short term installment loans. You may get a better idea of when it’s an appropriate time to use them.
What Are Short Term Installment Loans?
A short term installment loan provides you with money that you must repay (with interest and/or fees) over a series of fixed payments.
These payments set them apart from payday loans, which are due back in a single lump-sum.
Instead, the payments on your installment loan are spread out over multiple installments. Each payment may be roughly the same amount unless you make additional payments on top of what’s stated in your cash loan agreement.
It earns the “short term” portion of its name because these payments (or installments) happen over a pre-determined period of time that may range between a few months to a few years.
While this is longer than the average payday loan, this still isn’t a lot of time if compared to something like a mortgage, which may take a few years or decades to pay off.
Your Loan Agreement Has Your Installment Loan Details
In some cases, the due dates of your installments coincide with your pay dates. Or, your payments may follow a different schedule. Always check your loan agreement to confirm when your payments are due.
This agreement will also outline your rates and conditions. Pay close attention here. Some short term installment loans may come with high interest rates.
Why Would You Apply For Short Term Installment Loans Online?
Short term installment loans cater to specific kind of borrowing needs. Here are some examples of reasons why you may choose a short term installment loan over other alternatives.
1. You Have Bad Credit
Your low credit score could be a reason why you haven’t been able to get a personal loan or cash advance in the past.
That’s because many lenders require borrowers to have prime credit. A prime score, which is typically a score greater than 669, classifies you as a reliable borrower. It means you have a history of paying your bills on time, as well as a number of other factors that can affect your credit score.[1]
Your credit score isn’t the only way some lenders predict the chances you’ll make your payments on time. Your score may be checked, but some short term installment loans bad credit lenders use other information to make their decisions.
When it comes to short term installment loans, bad credit may not stop you from getting the cash you need. To qualify, you usually must have the following:
- A consistent income
- An active bank account
- Identification, like a driver’s license
2. You Need Money Fast
In an emergency, how quickly you can get your funds may be a vital detail of the funding process. It doesn’t make sense to apply for something that could take weeks to arrive when you need to pay an emergency expense.
Online short term installment loans usually work on a different timeline. Because they’re available over the Internet, you don’t have to spend time traveling to a brick-and-mortar location during business hours. Instead, you can apply from home, work, or anywhere else you get internet.
Some short term installment loans lenders offer the option to apply online from their website 24/7. This means you don’t have to wait for the usual business hours to apply. It’s as simple as visiting a website like Moneykey.com to get started.
Through this convenient application process, you might find out if you qualify for a loan in a matter of minutes. If approved, you may receive your funds as soon as the next business day.
3. You Don’t Have Collateral
In the financial world, collateral is another word for a valuable belonging you use to shore up your personal loan application. If you take out a secured personal loan, you will have to supply collateral.
Collateral is there for “just-in-case” scenarios. In case you can’t pay back what you owe, your lender may take this belonging to recoup the value of your personal loan.
However, keep in mind that this would only apply to a secured installment loan.
Because collateral guarantees payment, a lender assumes less risk if they grant you funds. Secured personal loans tend to have lower fees than short term loans without collateral as a result.
You may pledge a variety of items as collateral, such as jewelry, investments, future paychecks, and art. But perhaps the most common collateral are houses and vehicles when you take out a mortgage or auto loan respectively.
But what if you don’t have a valuable belonging you’re willing to attach to your loan? You may find short term installment loans online that don’t require collateral, which means two things:
- People who don’t own a home, vehicle, or valuable art may still qualify for an installment loan.
- Borrowers don’t have to worry about losing their pledged item if something goes wrong.
When to Get Short Term Installment Loans Online
These installment loans are designed to help cover one-time, unexpected expenses that need immediate attention.
Not sure what qualifies as a one-time, unexpected expense? Generally, you’ll want to skip over using short term loans to finance a last-minute vacation or shopping spree. It’s better to reduce monthly expenses, so you can free up cash to put aside in savings for these types of splurges.
For more insights into when a short term installment loan might work, read the list below. You’ll see what we mean by unexpected emergency expenses.
1. Your Car Needs Unexpected Repairs
Maintaining a vehicle can get expensive, which is why you should always set aside money in your budget for maintenance and repairs.
There’s simply no way to guess exactly how much you’ll need. But as a general rule of thumb, AAA recommends saving at least $50 a month, or $600 a year, for routine maintenance.[2]
You may need a higher or lower amount depending on the condition of your vehicle. If you still aren’t sure about how much money to set aside, use a budget calendar for help.
But what if unexpected repairs go over this estimate, and you have no other savings? If you rely on your vehicle to get to work every day, you may not be able to put off these repairs until you can afford them.
Getting short term installment loans online may help you get you back on the roads faster, even if you don’t qualify for other personal loans.
2. You Face a Medical or Dental Emergency
The only thing worse than being sick, is being sick and owing money. Unfortunately, this is a reality many Americans face if they need to see a doctor or dentist. Visiting these professionals often cost a lot of money if you don’t have insurance.
Without savings, you may put off seeing the doctor or dentist — which may not do your health or budget any favors.
If it’s serious, delaying treatment may result in even bigger bills later on. Lost time at work, prescriptions, hospital parking, and the cost of your appointment and treatments - it all adds up!
Short term installment loans may help you get the care you need if a minor accident, sudden illness, or acute dental problem comes out of the blue.
3. You Can’t Afford Unexpected Emergency Household Repairs
As a homeowner, you have an insurance policy that covers the big things that can go wrong. Basic home insurance usually helps when there’s damage caused by fire, windstorms, or lightning strikes.[3] Even if you don’t own a home, you may still need to make an emergency household repair.
But not everything that can go wrong with a home is the result of these disasters. Other “smaller” issues may crop up from time to time. Unfortunately, even the small things can be a challenge if you live on a tight budget.
Broken appliances, plumbing issues, and shattered windows are all your responsibility, and they can be pretty costly to fix. If your savings fall short of what you need to cover these essential repairs, short term loans may be an option.
Is a Short Term Loan Always the Answer?
Just because you have bad credit or don’t have collateral doesn’t mean that applying for short term installment loans is right for you.
Much like payday loans online, they might come with high interest rates and/or fees. Such charges may make it challenging to repay, even if the typical installment loan gives you more time to repay than the typical payday loan.
As a result, it’s best to rely on short term installment loans only when an unexpected need arises. More still, always double check that you can afford to make the payments according to the terms and conditions.
The Bottom Line on Short Term Installment Loans
If you have bad credit and face an unexpected emergency expense, short term installment loans may be something to consider. They’re conveniently available online, and they work fast to connect you with cash.
But like any important decision, applying for a loan is not one to be taken lightly. Talk to a short term installment loans bad credit lender to learn about what they do. Then look at the rates for the products they offer and see if you can afford to budget for the payments.
Feeling like you need more guidance? You may get more helpful tips by visiting our Resource Center. Check it out to learn more about your options.
[1] https://www.thebalance.com/what-is-a-prime-borrower-960747
[2] https://www.aaa.com/autorepair/articles/planning-for-auto-maintenance-and-repair-costs
[3] https://www.iii.org/article/what-covered-standard-homeowners-policy
