Cash advances, also known as short-term loans, are a simple, quick way to get cash quickly. Millions of people benefit from this kind of credit, but it’s important to use it responsibly. To avoid unpleasant scenarios, potential borrowers should consider these do’s and don’ts of short-term lending.
Don’t Borrow More Than is Necessary
Short-term loans aren’t a long-term financial solution. They’re best used during a temporary financial setback where someone needs quick cash. If someone takes a loan, they should borrow only what they need. Although one may qualify for $2000 or more, if they only need $500, it’s in their best interest to take only that amount. Otherwise, they may wind up with more fees and interest.
Do Set a Budget
Before applying with Blue Trust Loans, the borrower should think about whether they’d need the loan on payday. If they answer no, it’s likely that they’d be able to pay a substantial part of the loan with their next paycheck. It’s important to repay these loans as quickly as possible, and borrowers should leave room in the budget to make timely payments.
Don’t Pay Just the Minimum
A minimum payment is the lowest amount required to keep the account in good standing. These payments may be composed mainly of interest, which leaves only a small amount to go toward the principal. Making the minimum payment is ideal when the borrower can’t afford to pay more, but they shouldn’t make a habit of it.
Don’t Take a Loan to Pay Another Loan
In a practice referred to as loan cycling, many people use loans to pay off other loans. However, this is a bad habit, as consumers typically don’t have enough money to pay the interest accrued over the life of the loan. Once someone is caught in a high-interest debt loop, it’s hard to get out, because so much of the payment is going toward interest rather than the principal.
While short-term loans are a viable financial solution for many, there are some important things to think about. If someone is ready to get a loan, they should keep the above points in mind to prevent future financial troubles.