How to use a short-term loan wisely

By
Ailene Amaro
·
Nov 13, 2020
How to use a short-term loan wisely

A short-term loan is a convenient way to get through a financial dilemma or to fund specific purchases. With the current lending landscape, both small and medium-valued loans have become significantly easier to obtain, but there are downsides to that convenience. For one, the fast-paced money lending and transferring process mean that cash is easier to spend than ever. People can easily get cash loans online in an instant.

Mismanaging your loan can be detrimental as you can fall short on an intended purchase, which can eventually lead to falling into a cycle of debt. However, there are ways by which you can strategically stretch your loan and make it last as long as possible. All it takes is a little discipline, learning to say no to temptations, and a few tips and tricks to make the journey smoother.

Fund your business the smart way

Nowadays, it isn’t rare to find short-term business loans that can release under P3,000,000 in less than a week. You may have applied for one to help build capital for your business, fund expansion, or provide liquidation for a couple of months or years. While business owners often draw out financial plans before obtaining any type of loan, making that decision doesn’t mean that you can’t deviate from the original plan–that is, if the decision would greatly benefit the company.

For instance, you can continuously work toward lowering the cost of the supply chain and redirecting the money you save toward other developments, such as better marketing or longer-term use. By being smart about the way you allocate your loan, you’ll essentially be able to squeeze out as many benefits as possible at a lower cost.

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Don’t get too excited

One of the greatest drawbacks of convenience and accessibility is that they can bring about some of the worst financial habits. It’s a no-brainer that obtaining a small value short-term loan is extremely easy–so much so that some people can start depending on loans to get by, just like a credit card. Download the online loan apps and follow the next three easy steps to complete the loan application. It’s pertinent not to fall into the debt loop of short-term loans as the interest rate can be heavy on the pockets, and repayment is the only factor that never gets easier.

Moreover, with the sudden ownership of a lump sum, it’s inevitable for out-of-control shopaholics to experience the sudden urge for some retail therapy. Keep control of your funds and ensure that you’re spending them only for their intention. So if you borrowed money to replace your old couch, then the cash should go nowhere else but that couch! You can put aside any extra funds for future emergencies or use them to get a headstart on your repayments.

Shop smart

If you got a short-term cash loan to cover day-to-day expenses and bills until payday, then it’s important to use the money in the best way possible. For non-fixed expenses such as groceries and other necessities, don’t opt for more expensive options just because you have extra funds on-hand. Remember–you’ll have to pay the value off sooner or later, and a loan is essentially only a paid advance withdrawal of your salary.

A tip is to keep careful track of all the money you spend and receive. If you aren’t keeping everything on debit, it’s easy to disclude coins from your computations, but those little one pesos can add up! Meanwhile, if you’re paying for everything through a card, then keep in mind that transaction fees are automatically deducted from your account. It can cost as little as P5 to as much as P50 per transaction–regardless, the value adds up.

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Evaluate priorities

As cheesy as it sounds, life’s full of surprises, so there’s no telling when an emergency makes its way into your life or a sudden big event takes a toll on your finances. There are times when even the most meticulously-planned situations don’t work out–the same goes for loans. Suppose you applied for a fast cash to pay for a specific expense, only for another expensive emergency to pop up. In that case, you may have no choice but to evaluate your priorities and determine what to pay off first.

For some, that can mean making small adjustments, such as moving payment deadlines or holding off a purchase. To others, an emergency may throw off the entirety of their finances. But generally, you want to prioritize the more pressing expenses or sort your payments by deadline or flexibility.

Stay in control

The most important thing to remember when working with any type of cash loans online is not allowing the debt cycle to spiral out of control. You may have piled up loans out of necessity or as a last resort, but it’s meaningless to resort to short-term solutions when you can’t afford to pay them back on time. While the value you borrow may be small, its effect on your credit score can make or break your future financial prospects.

If you’re in a difficult financial position, it may be a good idea to look into other options before immediately resorting to convenience. For example, if you’re on a bad credit streak due to uncontrollable events, then you may be eligible for a balance transfer. Meanwhile, if you’ve been taking small value loans to pay for your child’s education, then it may be more economical to opt for a larger personal loan, which usually costs less in interest. And if you’ve been loaning to keep up a lifestyle you can’t afford, then it may be time to rethink your ways and carve a path toward financial recovery.

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Final thoughts

Anything that’s easy to obtain can also become easy to lose. The same principle applies to cash loans online that you borrow on a short-term basis. While the world is littered with temptations, stay focused on your reasons for resorting to a loan and don’t get distracted by impulsive wants and the feeling of ghost luxury.

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