Short Term Loans Can Quickly Turn Into Long Term Debt
Warning: Late repayment can cause you serious money problems
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Representative Example: Representative 1286.98% APR on a loan of £300.00 with 5 monthly repayments of £101.03 Total amount repayable £505.13 Annual interest rate (fixed) 290%
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Author: Internal Marketing Department
We've discussed in other articles how helpful short-term loans can be. The ease of access, the availability, the high acceptance rates, the immediacy of funds transferred to your account, it’s all so alluring that there really appears to be no reason for you to take out any other type of personal loan. However, no matter how attractive a financial product may be at first glance, as they are expensive there’s always the risk of rollovers, defaults, and plenty of room for the possibility of your short-term loan quickly turning into long term debt.
The bottom line is that it’s entirely undesirable for you to be paying an large amount of interest in exchange for a short-term loan when the reason you need the loan is because you are overall short on money. But short term loan consumers need to understand that financial institutions are bearing plenty of risk when they issue out short-term loans. They run the risk of not ever seeing their money again, and in such a financially stringent industry, it is very easy for customer to simply hide from their debts. This means that each loan that’s being taken out from the lender equates to additional risk being placed on it. This calls for the need for lenders to balance this so that whatever amounts of money are being lost can be recovered. It’s a collaborative effort, but after all, you pay for that acceptance of risk.
All of this may seem unfair to consumers, and to a certain extent, it is. But as long as you play by the rules, the risk of having your short-term loans turning into long-term debt is reduced. The issue that many people face when it comes to handling their short-term loans is that they fail to take it seriously and prioritize the repayments. This means that instead of paying off their short-term loan first, they choose to spend the money on other other things that can be labelled as discretionary. Not only are they prolonging their repayments and incurring penalty fees and rollover fees, but they’re also increasing their chances of falling into a long duration of debt each time they choose to ignore it. Everyone likes having easy access to money that they don’t have, but when it comes to paying it back, it just seems like an unnecessary expense. Having such a mentality is probably your biggest obstacle when it comes to preventing your short-term loan from turning into long-term debt.
There are some basic rules for you to follow to prevent such a situation from even occurring. Short-term loans require your immediate attention, and they should never be taken lightly. Once you’ve understood the sacrifices that come with it, you’ll be able to manage it better and have it paid off with complete ease. Make it a priority to make your repayments on time and set constant reminders for yourself so that you don’t end up forgetting about it. Making your repayments on time will also prevent the risk of having late penalties being incurred. As long as you bear all these basic rules in mind, your short-term loan quickly turning into long term debt will be no more than a mere myth.