I enjoy the outdoors. I like to hike up trails and kayak down rivers, camp under the stars and watch the sunrise. What I don’t enjoy, however, is when the outdoors try to follow me indoors — like the less-than-cuddly raccoon who ate a hole in the attic insulation.
And the only thing worse than coming face-to-face with a bit of misplaced nature in your living room? Paying for it. Especially when you call your insurance company and they tell you that, unfortunately, the family of armadillos digging up your plumbing aren’t covered under your policy — so you’ll have to pay for the damage yourself.
When life brings you unexpected expenses, a short-term personal loan can be a great solution, provided you borrow responsibly. Of course, “short-term” can be a relative phrase, referring to several different types of financing, and the right personal loan will depend on the length of loan you need. Below are our top picks for providers of short-term loans for bad credit.
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Best Short-Term Cash Advance Loans
The epitome of short-term loans, cash advance loans are typically smaller-sized loans with terms that average a week or two, but extend up to three months in some cases. Since the loan amounts and lengths are small, with less built-in interest profit than longer-term loans, short-term cash advance loans tend to charge much higher interest rates, often in the form of a flat fee due at the time you repay your loan.
To qualify for a short-term cash advance loan, you’ll generally need to have a valid checking account and meet monthly income requirements, which will vary by lender. The amount you can borrow will also depend on the lender, with loan sizes starting between $100 and $300. Our top-rated providers include options for short-term cash advance loans up to $2,500.
The main thing to remember about short-term cash advance loans is that they typically require a lump-sum repayment. This means you’ll need to repay your principal and associated fees in a single payment at the end of your term, which can be difficult for those who use short-term loans to cover regular expenses between paychecks.
While many short-term cash advance lenders will allow you to extend your loan, this extra service is hardly free. You’ll be required to pay an additional financing charge or service fee for each extension — and these fees can add up very quickly. To avoid accruing late fees or additional loan fees, be sure you can repay your loan as agreed before signing on the dotted line.
Best Short-Term Installment Loans
If you need a short-term loan that extends longer than three months, your best bet will likely be a short-term installment loan. In contrast to short-term cash advance loans, installment loans are repaid through a series of smaller monthly payments (called installments) over the course of the loan.
Additionally, installment loans generally charge much lower interest rates than cash advance loans, making them more affordable. And due to the repayment structure of installment loans, financing can be obtained for much larger amounts and repaid over longer time frames. For instance, our favorite providers include options for loans up to $35,000 and terms as long as 72 months.
One important thing to note, is that the longer your loan terms are, the more that loan will cost you overall. This is because every additional month you add to your loan will also mean more interest. While it’s tempting to select a loan with long terms to reduce the size of your monthly payment, the better option is to balance an affordable payment with a reasonable loan length that minimizes the total cost of your loan.
As an example, consider Petunia, a frazzled homeowner who needs to repair her screen patio after a friendly neighborhood bear decided to come in for a nap. If Petunia borrows $1,000 with a 15% APR and makes 12 monthly payments, she’ll pay $90 a month and a total of $83 in interest. On the other hand, if she repays it in six months, she’ll pay $174 each month and only $44 in interest.
Best Credit Cards for Bad Credit
Given the relatively high interest rates charged by short-term cash advance loans, a better alternative might be financing the purchase through a subprime credit card issuer. This can be especially true for times when you simply need a few weeks to repay your debt, rather than months or years, because you may be able to avoid paying interest altogether — or at least reduce your interest fees to a minimal amount.
The key is your credit card’s grace period, which is the time you have to pay your balance before you’re charged interest. In most cases, if you pay your entire balance before your bill’s due date, you won’t actually be charged any interest on that balance at all. This is true for subprime cards, too, including our top picks.
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Even if you need to carry your balance a little longer, you may still get a better deal from your credit card than a high-interest cash advance loan thanks to the way credit card interest works. The difference in the two systems can mean a difference of hundreds of dollars in fees, especially if you need to extend your loan.
For example, hypothetical homeowner, Hugh, needs to hire someone to remove a vacationing alligator from his swimming pool. An eight-week cash advance loan of $300 with finance charges of $10 per $100 would cost Hugh $30, plus $30 for each extension. That same balance on a credit card — even a high-interest subprime card — would likely cost him less than $10 a month to carry (although his minimum card payment may be higher).
Always Use Loans Responsibly
While it’s always best to plan ahead, sometimes life brings you unexpected expenses — like a family of furry woodland creatures breaking into your basement. Whenever you need term financing for one of life’s surprises (and its relatives), a short-term loan can be just what the zoologist ordered.
No matter what, though, be sure to use loans, and all types of credit for that matter, wisely and responsibly. Always make your payments as agreed, be careful to read the fine print of your agreements, and never borrow more than you can afford to repay. Late payments, missed payments, or, worse, defaulting on your debt can result in serious credit impacts, making it more difficult — and more expensive — to obtain new credit in the future.