There is a lot of misinformation about the pros and cons of short term loans versus long term loans. The facts are that the short term loan advantage far outweighs the drawbacks.
FICTION:
Short term loans have such high interest that you will pay more than you would for a long term loan.
FACT:
Yes, short term loans do have higher interest rates than long term loans. That isn’t the fiction.
Consider this: the amount of interest paid is determined by the amount of the loan, and the length of time before it is repaid. Even with a higher rate of interest, you will pay a lot less in interest and fees for the short term loan.
Paying a smaller percentage for a much longer period of time may look good on paper, but once you add it all up you are paying more in the long-term!
FICTION:
Short term loans won’t help rebuild your credit.
FACT:
You can rebuild your credit faster with these kind of loans!
The biggest short term loan advantage is that you don’t have to labor under the burden of debt for a long time. Borrow the money, then repay the money as quickly as you can, and then the loan is behind you.
The act of borrowing money and then repaying it is in fact what the entire credit system is based on. Taking out smaller loans, then paying them off in full, can make an impact on your credit score much faster than with long term loans.
FICTION:
Short term loans will keep you on the hook for as long as possible.
FACT:
Back in the day when payday loans were the only way to borrow money only, that was true. Payday loans trap you in a cycle of debt, and keep piling on interest every single paycheck.
Installment loans are different, and provide another short term loan advantage. With an installment loan you get all of your payments, and a total accounting of the interest, at the start of the loan. You know when each payment will be, and you will know exactly when the loan will be paid off.