You’re driving to work one morning and you get a flat tire. Or, your dog wakes you up in the middle of the night throwing up. Or your child needs an expensive new calculator right away. If you don’t have a healthy savings account, these unexpected expenses can wreck your budget.
Life can get messy fast and when the unexpected happens, a short-term loan can be a lifesaver. They’re not ideal ways to manage expenses, but when used responsibly, they can be a big help.
3 Situations when a short-term loan makes financial sense
There’s a big difference between a real emergency that justifies a short-term loan and a skippable expense. If you find yourself in any of these situations, a short-term loan may be your best bet.
1. An unexpected (or very necessary) medical procedure
From a toothache that needs a root canal or a serious case of the flu, health issues come up. Unexpected medical procedures can put an enormous hole in our finances and their high cost can cause you to delay getting treatment at all.
But going without medical care can cost you more over the long run. A simple issue can become more serious and require more expensive treatment and you’ll need to take more time off of work. Prioritizing your health and necessary treatments can prevent more intensive procedures later on.
Whether you need help paying for prescription medicines or co-pays, or simply need a little cushion to help your family get by until you are well enough to get back to work, short term loans can help your financial situation from going off the rails while you focus on recovering and getting back to normal, everyday life.
2. Car repairs
Having trouble with your car can spell out enormous problems for your family and finances. When a car breaks down, you not only have to worry about the cost of repairs, but also how to get to work while it’s in the shop.
A short-term loan can be an efficient way to get you back on the road so you can keep getting to work and paying your bills.
3. Potential eviction
When money is tight and you’re living paycheck to paycheck, one small unexpected expense can cause you to run out of cash. If you’re behind on your rent, you may face eviction from your landlord.
An eviction can be both financially and emotionally devastating to a family. From scrambling to find a new place to live to damage to your credit report, an eviction has long-lasting consequences.
If you think you might be about to lose your home, a short-term loan can help fill the gap so you can keep a roof over your head.
Strategies for repaying your loan
If you’re facing an emergency and don’t have the money to pay for it, it’s important to have a plan in place for repaying the loan before ever applying for one. Otherwise, a short-term loan can cause long-term problems.
Consider these strategies to pay off your loan and build an emergency fund in the future:
1. Pick up a side hustle: If your income isn’t large enough to pay the bills and tuck away a little extra each month, consider picking up a side hustle like delivering groceries or babysitting. Some side gigs pay as much as $20 per hour. That additional income can help you accelerate your repayment so you’re out of debt faster.
2. Examine your budget: Even if you’re living close to the bone as it is, examine your bank and credit card statements and look for areas to cut back. Even cutting back on inexpensive services like Netflix can help. The $10 per month you save is extra money to pay off your debt or to start a savings account. Throwing every extra dollar toward debt or savings can help prevent similar situations later on.
3. Make drastic changes: If you’ve cut every corner and can’t boost your income any more, you might need to make drastic changes to pay off your short-term loan and start saving. While unpleasant, drastic lifestyle changes like getting a roommate or taking on a second job can be what you need to become more secure.
Applying for a short-term loan
If you’ve considered the benefits and drawbacks of a short-term loan and decide it’s for you, it’s wise to compare multiple offers from different lenders. Check out our list of short-term loan lenders to find a loan that works for you.
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