You are missing money right now and here. However, that in itself does not tell much about what a short-term loan is suitable for. What is important to note is the word “short-term”. It refers to a need now and here and thus not a long-term loan requirement. So when can a short-term loan pay off?
You know you have the money in hand at next month’s salary
The common definition of short-term loan is that it has a maturity of less than one year. With us, the maturity is 30 days. Thus, a short-term loan from us is a good alternative if you are facing an expense that you can afford to pay in a relatively short time.
Short-term loans are typically used to postpone an urgent expense. However, it can also be used if the expense is not urgent. The important thing here is that you have considered your financial situation so that you do not put yourself in a difficult position.
In other words, what you borrow money for is irrelevant. As long as you can justify it to yourself. And here, however, we must advise you to listen to your common sense. It is never appropriate to raise short-term loans to meet long-term borrowing needs. In the case of long-term borrowing, there are cheaper alternatives on the market, despite the fact that these solutions are usually more time-consuming, difficult require discussions with the bank, etc.
You have an expense to get out of the world here and now
As I said, an expense doesn’t have to be urgent until it can pay off to cover it with short-term loans. But it is nevertheless in this situation that the type of loan has its greatest justification. A short-term loan is obviously designed to ” temporarily ” remove the expense. That way, you can safely plan next month’s budget based on the extra cost.
An urgent expense can be a home repair, a fine, an expensive dentist’s bill or something quite fourth. These are expenses that you would rather not wait, as some of them become more expensive over time.
Example: You have a dripping faucet. It bothers you, but you think it can wait to be made. Suddenly, it drips more frequently and more powerfully, and you’ve suddenly spent more than necessary on your water bill, without thinking about it. On top of that, it may also be a major repair that needs to be done now than it was before. Thus, you have charged yourself a more expensive cost than necessary.
Precisely this example tells us about the importance of getting urgent spending out of the world as quickly as possible – and that a short-term loan can be a good solution for the purpose. That’s because you get the expense out of the world here and now, but do n’t panic about it. The short-term loan will postpone your expense so that you can find the right financing solution.
Thus, there is not a single definition of when short-term loans can pay off. It can pay off in a number of situations, and it is a subjective assessment of whether it can pay off for your particular need.