Short-term loans are among the most accessible types, and even borrowers with bad credit can qualify for them. That is also why it’s easy to get drowned in multiple debts if a borrower doesn’t know any strategy to manage loan repayments efficiently.
For an in-depth guide to paying off short-term debt quickly, here are some strategies borrowers can try.
What are Short-Term Loans?
Short-term loans provide quick and easy access to funds for emergency expenses. They are not long-term commitments. Typically, these loans have a repayment period of one to three years, which can be monthly or weekly.
Beyond emergencies, short-term loans can also help with planned personal expenses. Whether covering tuition fees, funding a big purchase, or managing temporary cash flow gaps, they offer flexibility when extra funds are needed.
Many people turned to short-term loans during the COVID-19 pandemic to handle financial setbacks, such as job loss or reduced income. These loans provided a safety net, helping borrowers cover essentials until their financial situation improved.
With the growing demand for faster financial solutions, online loans same day release has become a popular choice, offering instant access to funds without lengthy approval processes.
How to Pay Off Short-Term Loans Quickly?
To focus more on financial goals, here are some strategies for borrowers struggling to get themselves free from short-term loans.
Reassess Your Budget
Consumers have various money-saving strategies at their disposal. Simple budgeting adjustments, such as bringing lunch to work instead of eating out, borrowing books from the library rather than purchasing them, canceling unused subscriptions, and opting for home workouts instead of a gym membership, can make a significant difference. Implementing one or more of these strategies can help free up funds to repay short-term debts more efficiently.
Look for Side Hustles
In addition to their full-time source of income, borrowers can also look for short-term work to earn extra money that they can use to pay down their debts. Some side hustle ideas to try are freelancing online, ridesharing, online tutoring, or affiliate marketing, among many others.
Sort Your Debts
Borrowers must list all their debts, sorting them from smallest to largest balance. From this list, they can choose their strategy for paying them off. For example, the snowball method focuses on paying off the smallest debt first for quick wins. Another approach is the avalanche method, which focuses on eliminating the largest debts first to reduce the overall burden faster.
Refinance
Refinancing allows borrowers to switch to a loan with more suitable terms, making repayments easier to handle. This can provide greater flexibility and free up funds that can be used to pay off other outstanding debts more efficiently.
Types of Short-Term Loans
A borrower can apply for different types of short-term loans, depending on their financial position and needs. For reference, these are the most popular options:
- Payday Loans
Employed people take out payday loans and repay them when they get their next paycheck. According to True Tamplin, Forbes Contributor, “These loans are typically small, ranging from $100 to $1,000, depending on state regulations and the borrower’s income.”
They offer a quick and convenient solution for those who need immediate cash to cover short-term expenses. To qualify, borrowers must provide electronic transfer or post-dated check times to their next payday. With payday loans, borrowers can pay in installments or lump-sum payments.
- Pawn Shop Loans
If auto title loans use vehicle titles as collateral, pawn shop loans use personal items like electronics, collectibles, antiques, and jewelry. Pawn shops don’t usually require credit checks. But if a borrower fails to pay the loan on time, with repayment terms often one to two months, the pawn shop gets to keep the item that it can sell to someone else.
- Auto Title Loans
Auto title loans use the borrower’s vehicle title as collateral. Typically, the loan must be repaid within 30 days, and borrowers must also pay a fee in exchange for the loan. Once approved, the lender will hold the title loan until it’s repaid. If the borrower chooses to default on the loan, the lender can seize the vehicle.
To qualify, lenders would ask for the borrower’s car title, photo ID, and application. They may also require borrowers to buy a roadside service plan or request a spare set of keys.
- Credit Card Cash Advance
This option is a quick solution for credit card holders. They can borrow funds against their credit card’s available cash advance limit. Taking out cash from credit cards is charged, and the fee ranges from $10 to 5% of the amount being borrowed. The downside of this option is that it can signal rating agencies that a borrower may be in some financial trouble, potentially harming their credit score.
Making Short-Term Loans a Smart Choice
Getting a short-term loan should be a smart financial move. Thus, taking the time to check lender requirements, compare offers, and read the fine print can save you from headaches down the road.
A good lender will be upfront about the terms, so you know exactly what you're signing up for. The more informed you are, the easier it will be to manage repayments and keep your finances on track.
At the end of the day, a short-term loan should work for you, not against you. Make sure it’s the right fit, and you’ll be in a much better position to handle whatever comes next.
