Short-Term Personal Loan: Inflation isn’t at sky-high levels anymore, and economists believe it will continue to fall. But that doesn’t mean you don’t still find it hard to handle these elevated prices and interest rates.
In a typical emergency, you might turn to personal loans or lines of credit for assistance. A new survey from Bloomberg reveals you wouldn’t be alone. Two out of three Americans would have to borrow money to cover an unexpected emergency of $400 or more. Many more are on the brink of calamity, as they carry credit balances and struggle to make ends meet.
With inflation the new normal, can you rely on these loans for help? Let’s dig into this issue below.
What Are Short-Term Personal Loans?
Short-Term personal loans are financial products that deliver a small amount of money on a short timeline.
Everything from your application process to the repayment experience is on an accelerated schedule. In many cases, financial institutions have automated their underwriting systems, so they can deliver news of approval quickly. They often provide same-day business funding via direct deposit loans. And when it comes time to pay back what you owe, you usually have a few weeks or months to do it.
How long “short” means depends on the type of funding you get. If you visit the financial service provider MoneyKey, you’ll see they offer both installment loans and lines of credit. An installment loan breaks up your bill into several payments spread out over the calendar. A line of credit, on the other hand, delivers your bill every month. You have the option to make a minimum to keep your account in good standing or pay it off at once.
It’s important to note that these short-term personal loans are not like payday cash advances, which are due back by your next payday — usually a two-week period. They’re also not like car financing or mortgages, which can last years if not decades. They’re somewhere in between.
When Should You Consider Short-Term Loans?
The financial service provider MoneyKey says most people use short-term personal loans to help with unexpected emergency expenses when they don’t have the money saved up to deal with them. At first blush, struggling to balance your budget may qualify as an emergency, but it does not meet this definition.
Let’s unpack what an unexpected expense truly means:
- It’s unpredictable, so it’s not something you can foreseeably include in your budget.
- It’s a one-time expense, so it’s not something that will remain in your budget for months to come.
- It’s a relatively minor expense, as most lenders won’t provide enough funds to deal with big bills.
Now let’s compare these rules to inflation.
- While the exact rate might fluctuate to reflect the market, it’s a predictable presence in the economy and your budget.
- Inflation isn’t a single bill but rather an ongoing influence on every product and service you purchase.
- While inflation may only affect each line in your budget by a scant 5% or so, it adds up when every line in your budget suffers the same increase. For many families, it’s not a minor expense.
Let’s put this into practice. If your furnace breaks down suddenly, and you don’t have enough savings to fix it, you might consider a line of credit for help. But if your regular heating bills are too much to handle, a line of credit isn’t the answer.
How Can You Handle Inflation without Borrowing Money?
Classic financial advice never goes out of style, even in challenging times. Commit to prioritizing your essentials and reducing your spending. You might have to reach out to creditors to explore payment plans or get a second job to boost your income. And if all else fails, reach out to a free credit counselling organization for help.