Whether you run a small business, or just need some extra cash, at some point you may need a short term loan. Needing a little extra money to get through a rough period can happen to anyone.
Luckily, getting a short term loan has never been easier. However, getting the loan isn’t the issue for most people. Getting the best of it is.
Many people have trouble paying back their loan. For most, falling behind on a loan is entirely preventable. You just have to know how to handle it.
Making the most of your loan isn’t difficult, as long as you create some rules for yourself. Follow these steps to get the most out of your loan.
Always Know the Terms and Conditions
People that need money quickly tend to be in a rush. Maybe your business has cash flow problems and you need to cover salaries for the month. Maybe you’ve just moved and need some cash to tide you over until you start a new job.
Whatever the case, you may be in a rush to get your money. Never, ever take out a loan without reading the terms and conditions. If you don’t understand something, ask to have it explained to you.
Any good lender should be able to explain the terms and conditions of the loan clearly. If you’re still confused, or feel pressured into signing something you don’t understand, then walk away. There are better options out there.
Needing a loan can be stressful, but don’t get taken in by a less-than-reputable business.
Take What You Need, Leave the Rest
A short term loan should be about getting you through a tight spot. Many of these loans will reach maturity in a year or less. Don’t use it as a long-term plan for your financial health.
Let’s say you need R1,500, but you’re told you qualify for a loan of R3,500. Your first reaction might be to take it. You could always use the extra cash, right?
Don’t do this. Take what you know you need, and only use it for the purpose you had in mind.
You can easily wind up spending the extra money on something you don’t need. Trust us, it’s human nature. The problem is, then you have more interest to pay off, as well as the higher principle.
Repay Your Short Term Loan as Quickly as Possible
When it comes to paying bills at the end of the month, no one wants to pay more than they have to. But don’t use this mentality when it comes to your loan. Minimum monthly payments may be tempting, but they’ll cost you in the long run.
The only reason to make a minimum payment is if you absolutely cannot afford to pay any more.
Pay off your loan as soon as humanly possible. Take a hard look at your lifestyle and see if there are any changes you can make to make bigger payments.
With that in mind, think about looking for secondary sources of income. Some people in this position don’t have time for a side job. That’s understandable.
But if you realize that you have some substantial free time, use it to look for another source of income. It might not be your ideal job, but every bit helps. Remember, it’s only for the duration of the loan.
You’ll be happy you made those changes once you send your final payment.
Make A Budget
You should always have a budget for your income, but we realize sometimes it just doesn’t work out. That’s why you got the loan in the first place, right? But now it’s time to adjust your budget to fit the loan.
Actually, you should do this before you even take out the loan. We just talked about paying more than the minimum each month. Before you take out the loan is the time to do the math on how you’re going to make that happen.
If you need this loan and you truly can only make minimum payments, that’s okay. But you need to have a budget and a game plan in place to make sure you stay on track.
Drawing out a budget can be tedious, but it must be done. Take your monthly income and begin subtracting all the necessities. Once you’re done, look at the amount left.
Is it enough to make the minimum payment? Good. More? Even better.
Don’t Use It To Pay Off Another Loan
Using a loan to pay off another loan is one of the most dangerous financial moves you can make. It’s the opposite of getting the most from your short term loan.
You’re essentially losing money on multiple fronts by paying off interest with another loan. Remember, the second loan has interest, as well. This is known as loan cycling, and it’s very risky.
Make sure you’ve exhausted any and all other options before you begin considering this.
Don’t Miss Payments
This isn’t meant to berate anyone who’s missed a payment before. It happens. But if you’re using a short-term loan, you really need to make all your payments.
Missing payments can cost you much more than you think. Late fees just add more to the balance that you owe, and will have to eventually pay off. The longer you take to pay off the loan, the more you pay.
So avoid missing payments at all costs. It can be tough feeling like you don’t have any money left over at the end of the month. But just wait until you’ve paid off the loan for good.
Nothing beats that feeling.
Ready For Your Loan?
After reading these points, do you feel that a short term loan is right for you? If so, then apply today at LittleLoans.
It’s quick, easy, and best of all, you’ll get your money fast. Over 100,000 South Africans have trusted LittleLoans. Now it’s your turn to get the perfect short term loan for your needs.