The use of a loan responds to various situations, such as rental investment or the purchase of household appliances. When faced with specific or urgent needs, consumer credit can be very useful. In these cases, short-term credit, with a repayment term limited to two years, is a practical and very timely solution.
The advantages of short-term credit
- A limited repayment period: unlike real estate loans which can be spread over 15 or 20 years, short-term credit does not exceed two years.
- Easier to manage credit: Due to its limited duration, this type of consumer credit is subject to lower interest rates than long-term loans, because it represents less risk for the lender.
- Simpler credit to obtain: being less risky for the organizations which grant it, short-term consumer credit is obtained more easily, because the conditions are less strict. In addition, its limited duration facilitates faster cancellation of debt.
The limits of the short-term consumer loan
- Larger monthly payments: the cost of short-term credit is quite limited compared to other heavier types of credit, but it should not be forgotten that the amount of monthly payments will be higher in comparison. It is therefore useful to carefully check the short-term credit offers according to the credit platforms that offer them, in order to find a fair and competitive rate.
- Beware of accumulating short-term credits: because of the ease of subscribing to a short-term credit, it can be tempting to get used to and accumulate a certain number. Even if the weight of a single consumer loan is not too heavy to bear, the repayment of several such loans can be risky.
- Favor short-term credit for ad hoc needs: in order to avoid certain pitfalls, it is recommended to limit the use of consumer credits to ad hoc or urgent needs, and not on a regular basis. In the case of larger financing needs such as real estate, the use of a long-term loan is often more relevant.
Probably the top reason for getting a short term loan is for someone who has a bad credit record. Often people who have a bad credit record do not have access to credit cards or overdrafts. This means that if they need money quickly they do not have a way of getting any.