We’ve talked about payday (cash advance) loans, but there are other options for personal short term loans. Widely available online from a number of companies, there are some important differences between personal unsecured cash loans offered on a short-term basis and traditional payday loans.
One important advantage for your bottom line are the interest rates. While we have discussed some financial crises that may arise in which it can make sense to take out a payday loan, one should still consider the interest rates and seek out all possible options to compare them. According the Wikipedia, the interest rates on payday loans, which typically include a repayment requirement of $115 to $130 per $100 borrowed for a two-week period will translate into an annual percentage rate of 390% to 780%.
Companies offering payday loans state that it isn’t reasonable to list their interest rates as yearly rates, because they do not offer such long-term loans. It is true that it is essentially impossible to roll over these loans into the longer term, but it can be possible to initiate a number of loans back-to-back to essentially create a longer-term loan, if one can afford the additional fees with each new loan. While payday and cash advance loans are not available as year-long loans, the only way to actually compare different loans offered is to figure the interest and fees over a longer term so that you are able to see the real differences between various lenders.
Compare these rates to ThinkCash loans, which are short term personal loans offered from between 25% up to as much as 75% lower on overall interest charges. ThinkCash loans are offered at varying rates, depending upon the amount borrowed, the term of the loan, and the borrower’s credit rating, and range from 87% to 365% APR, which is a significant savings over the typical payday loan rate.
Remember that short term loans of any type will require higher interest rates than long-term loans. They are generally unsecured and processed quickly, both of which will serve to increase the interest rate because of the risk and the expense to the lender, and that is only fair and to be expected.
However, on the other hand, competition among lenders is often keen, because there are so many sources out there vying for business. This is especially apparent online, which opens the door for many lenders to offer services to consumers they would not otherwise be able to reach. Because of this intense competition, rates are lower than they might otherwise have been. The opportunity to select a lender benefits the consumer by making it more likely that they receive the loan they seek, and giving them the opportunity to choose a better interest rate as well.
With all that being said, short term personal loans are still higher in interest than other options that may be available to the consumer. For that reason, just as we have discussed before, we encourage the borrower to explore all options available when a loan must be taken out immediately and choose the best one for their personal situation, taking into account all factors, including interest rate, ability to repay on schedule, ability to secure a loan from that lender, associated fees and penalties, and any other options available.
Of all these factors, the one most important to many consumers is the ability to repay the loan according to the lender’s stipulations without causing further financial difficulty. If taking out a loan puts the consumer in deeper financial trouble, taking out another loan will the the inevitable next result, and adding more fees and interest on top of those already accrued will lead to another loan, until eventually the borrower is unable to repay the loans. For this reason, flexibility in repayment schedules is of greatest importance.
This is one area where payday loans typically offer very few options, and the very feature that causes so many problems for consumers who take out payday loans without making sure of their ability to repay them according to schedule without further compromising their financial position. ThinkCash offers the option of installment payments. A loan such as this can represent a much safer one for the borrower, making repayment according to the agreed-upon terms much easier and more likely, which will help to rebuild credit rather than destroying it.
It is also important to seek a lender that will allow the loan to be repaid early without a penalty if it becomes possible for the borrower to do so. Again, companies such as ThinkCash allow repayment on time or early, according to your own choice at the time, with no extras fees or penalties, giving you more flexibility in handling your finances.
When you are dealing with a financial emergency, it may be tempting to take the first available option. However, if it is at all possible, it is better to research at least a few different kinds of options before making a decision. Protecting your financial future is the goal and reward of careful decision-making.
Check this animated video to learn more about types of short term loans: